📈 CBSL Chief Defends Exchange Rate Policy & Pushes Back on Debt Stock Criticism

Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe strongly defended the country’s flexible exchange rate framework during a Committee on Public Finance (CoPF) hearing, rejecting claims that rupee depreciation mechanically worsens the national debt burden. • Core Policy Defense: The Governor maintained that Sri Lanka's external debt stock—estimated at around US$ 30 Bn—remains unchanged in foreign currency terms. Obligations must be evaluated and serviced through foreign exchange earnings rather than nominal rupee conversions. • Macroeconomic Balance: Currency depreciation provides vital offsetting economic benefits, including enhanced competitiveness for major export sectors like apparel & textiles and tea, alongside higher government revenues from import duties and dollar-linked taxes. • Growth vs. Stability: Responding to criticism on economic growth constraints, Dr. Weerasinghe clarified that the CBSL’s legal mandate is strictly limited to maintaining price and financial system stability. Broader growth depends on key sectors like tourism, agriculture, and industry. • Historical & Expert Support: The flexible, market-based exchange rate framework aligns with historical policies, including a 2016 IMF Letter of Intent acknowledging market-determined currency value. Experts note that long-term currency stability cannot be artificially engineered and remains heavily reliant on structural reforms to boost productivity and current account surpluses.