📈 Rupee Pressure Driven by External Shocks & Overreaction, Says Former CBSL Chief

Former Central Bank Governor Dr. Indrajit Coomaraswamy stated that recent rupee depreciation is an externally induced development rather than a domestic policy failure, making it qualitatively different from the 2022 crisis. Key Drivers & Market Behavior • External Shocks: Pressures stem heavily from the Middle East conflict, which has driven up the energy sector import bill. The CPC's monthly oil import bill surged to approx. US$ 521 Mn in May 2026, up from US$ 152 Mn in December 2025. • Market Overreaction: Importers are front-loading imports while exporters are delaying forex conversions due to "2022 memories," causing artificial liquidity issues. Economic Fundamentals & Policy • Stronger Reserves: Usable foreign reserves have risen significantly to approx. US$ 5.3 Bn (excluding the PBOC swap), compared to just US$ 20 Mn during the April 2022 debt standstill. • Inflation Outlook: Inflation accelerated from 2.2% to 5.4% due to external price pressures. If it threatens the upper limit of the CBSL’s 3%–7% target band, a tighter monetary stance and interest rate adjustments may be assessed. • Structural Reforms: Institutional reforms via the Central Bank Act and Public Finance Management Act prevent past policy errors like monetary financing. Dr. Coomaraswamy cautioned against broad import restrictions, advising that future growth must rely on productivity, structural reforms, and macroeconomic discipline.