• Yesterday’s US $ selling rate was indicated as Rs.259.99 and the buying rate as Rs.249.96
• CB on Monday devalued the rupee by about 15 per cent
• Latest move could encourage higher worker remittance income, exports

 Sri Lankan rupee hit an all-time low yesterday following the Central Bank’s move to float the currency against the US dollar, allowing market forces to determine its value.   

According to the telegraphic transfer rates issued by the Central Bank yesterday, the selling rate of a US dollar was indicated as Rs.259.99 and the buying rate as Rs.249.96.   

The Central Bank on Monday devalued the rupee by about 15 per cent, saying it would allow greater flexibility of the exchange rate, which created some confusion whether the Bank was introducing a new upper cap or letting the rupee go.   

However, yesterday’s telegraphic transfer rates indicated that the Central Bank had finally let the currency free from its grip, possibly ending the current shortage of dollars in the country.   
As some economists had pointed out, what Sri Lanka had was a shortage of dollars at the Rs.200-203 exchange rate ordered by the Central Bank.   

Hence, the latest move by the Central Bank on the exchange rate front could encourage higher worker remittance income, exports and other capital flows, thus effectively ending the commodities shortages the people are suffering from.   

However, it remains important for the Central Bank and the Finance Ministry to work on a coherent and clear communication strategy to build market and investor confidence.

   
At the same time, the government should take up the tough reform measures mentioned in the Central Bank’s eight-point policy document released last week, such as the market pricing of fuel and electricity, tax increases and selling of non-strategic State assets, to ensure a sustainable recovery path for the economy. 

• However, it remains important for the Central Bank and the Finance  Ministry to work on a coherent and clear communication strategy to build  market and investor confidence