Despite the positive prospects of the country securing the US$ 2.9 billion International Monetary Fund (IMF) bailout package, Fitch Solution recently maintained its forecast for the rupee to fall to a record low of 390 per dollar by the end of the year.
Dr. Nandalal Weerasinghe, the governor of the Central Bank, who has previously praised Fitch solution’s forecast, is strangely questioning Fitch solution’s forecast in this instance.
Fitch solutions sceptical forecast drew the governor’s criticism of it.
Governor expressed his concern that such long-term exchange rate forecasts are both impossible and impractical.
Governor Dr. Weerasinghe believes that the forecast assumes a US $ 6 billion annual debt service obligation until 2029. He stated that this figure is extremely high, and that such a large amount on debt servicing is highly unlikely given the current debt restructuring negotiations. He contends that such long-term predictions are unimaginable in reality.
The Governor did not rule out the Central Bank intervening in the forex market if necessary, but only in small volumes. He believes that with the recent appreciation of the Sri Lankan rupee, the market will eventually adjust to the new rate.
Further explaining, he stated that the smart market we have invariably exhibits fluctuations, which is why the CB has kept the option open to intervene without disrupting the market forces movements.
