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Former CBSL Chief clarifies background of decision to provide greater flexibility in Exchange Rate

Statement by Ajith Nivard Cabraal on 20th April 2022

This statement is made by me to clarify the background of the decision to provide greater flexibility in the exchange rate as announced by the Central Bank on the 7th March 2022.

In that regard, it is to be noted that the Monetary Board decided on 7th March 2022 to “allow the market to have a greater flexibility in the exchange rate with immediate effect and communicate that the Central Bank is of the view that forex transactions would take place at levels which are not more than Rs. 230 per US dollar”. On the same day, an announcement was made to the media in line with the above decision. Refer: https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/press/pr/press_20220307_policy_package_to_support_greater_macroeconomic_stability_e.pdf

From the above it will be clear that, while the Monetary Board had, as a market guidance, expressed its “view” as to the level at which forex transactions would take place, a clear decision had been taken to allow for the flexibility of the Sri Lankan Rupee in the Forex market. It would also be noted that from 8th April 2022 onwards, the Monetary Board under the new Governor and new Secretary, Treasury have continued with the above exchange rate policy, without fixing a specified exchange rate, as was the case immediately prior to 7th March 2022.    

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