📈 CBSL Steps In to Calm Rupee Volatility

The Central Bank of Sri Lanka (CBSL) is intervening to manage sharp exchange rate fluctuations driven by external global shocks and speculative market activity. • Overall Figures & Exchange Rate: The Sri Lankan rupee has depreciated 4.8% so far this year, crossing Rs. 331 per US$ from around Rs. 309 in late 2025. CBSL expects nearly US$ 1.00 Bn in multilateral inflows to stabilize the market, including US$ 700.00 Mn from the IMF next month, alongside US$ 250.00 Mn from the ADB and World Bank. • External Sector Pressures: External volatility is driven by rising global energy prices and the Middle East conflict. Sri Lanka’s petroleum import bill reached US$ 1.00 Bn in the first four months of 2026, compared to US$ 1.50 Bn for the entire previous year. Driven by fuel, electricity, and transport costs, headline inflation accelerated to 5.4%. A small current account deficit is projected for 2026 after three years of surpluses. • Sector Performance & Liquidity: Worker remittances rose to over US$ 3.06 Bn for Jan-Apr 2026, a robust 24.5% YoY increase. Tourism earnings reached US$ 954.00 Mn for Q1 2026, though recent inflows have eased. The trade deficit widened to US$ 2.30 Bn during Jan-Mar 2026. Private sector credit expanded by Rs. 2.10 Tn (+25.2%) in 2025, driving import demand. • Reserves & Interventions: Foreign currency reserves fell by US$ 295.00 Mn to US$ 6.54 Bn in March. CBSL became a net seller of US$ 13.00 Mn in April—its first net sales in 22 months—but remained a net purchaser of US$ 697.20 Mn during Jan-Apr 2026. • Policy Outlook: CBSL will not defend a fixed rate but will smooth short-term volatility. Plans are underway to introduce a real-time reference exchange rate indicator by year-end to deepen market operations.