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Rupee likely to lose fifth of its value by end of this year, says Fitch
- Fitch maintains its forecast for rupee to weaken to a record low of 390 per dollar by year-end
- Expresses optimism in SL bagging IMF bailout package by 2Q23
The Sri Lankan rupee, which gained briskly in the last couple of weeks over the hopes of the island nation securing a deal with the International Monetary Fund (IMF), may resume declines by the end of 2023 and is likely to lose a fifth of its value, according to Fitch Solutions.
The rupee appreciated 3 percent to 317.7 against the US dollar yesterday, taking its annual gains to 15 percent and becoming the world’s best-performing currency so far this year.
Fitch maintained its forecast for the rupee to weaken to a record low of 390 per dollar by year-end.
However, Fitch expressed optimism in the island nation bagging the IMF bailout package by 2Q23 but cautioned about possible hiccups going forward.
“… there is potential for disruptions after the initial board approval as authorities may find it challenging to stay on track with the IMF programme amid a weakening economy and a local election likely on the horizon,” Bloomberg quoted Fitch Solutions Country Risk Analyst Seah Wang Ting as saying.
“Sri Lanka still has significant external debt repayment needs and will need to build up its foreign reserve buffer over the coming months, which would put downside pressure on the exchange rate,” said Fitch in its new report.
The agency further said the rupee may also be pressured by tightening global monetary conditions.
Earlier this week, President Ranil Wickremesinghe reiterated that the country needs to repay about US $ 6-7 billion foreign loans on average each year until 2029.
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