CBSL Chief: SL economy will recover at rapid pace in second half of 2023

By Shyam Nuwan Ganewatta

Sri Lanka’s economy would recover at a rapid pace in the second half of 2023, Central Bank Governor, Dr. Nandalal Weerasinghe said yesterday addressing a press conference in Colombo.Dr. Weerasinghe also said that the inflation would drop to a single digit by the end of July 2023.

Strict fiscal and monetary policy of the Central Bank was the main reason for this rapid decrease, Dr. Weerasinghe said, adding that the Central Bank did not have a predetermined level at which it would halt the appreciation of the rupee. Instead, it aimed to curb excessive volatility in the currency while allowing it to fluctuate within a flexible exchange rate framework. The CBSL had actively intervened in the market to increase reserves and prevent drastic fluctuations in the rupee’s value, the Governor said.

Since March, the rupee had appreciated from approximately 360 against the US dollar to around 290 at present. The Central Bank had purchased dollars from the market to bolster reserves and mitigate extreme movements in the rupee’s value. In May alone, the bank acquired 662 million US dollars, bringing the total net purchases to 1,671 million US dollars thus far, he said.

The Central Bank intended to lift certain exchange controls including capital flow measures in the near future. Additionally, a set of import controls will also be removed. As of the end of May, Sri Lanka’s gross foreign reserves stood at an estimated 3.1 billion US dollars, according to the Central Bank.

Regarding a budget support loan received from the Asian Development Bank, the funds were currently held in the Treasury account. However, when the Treasury required funds, the money would be given to the Central Bank in exchange for rupees, Dr. Weerasinghe said.