LKR further depreciates despite CBSL efforts

Colombo (News 1st) - The political crisis in Sri Lanka which has been in play for nearly 3 weeks has attracted international negativity and national disquiet. The perilous state of the economy is reflected in part by the ever-depreciating exchange rate. Related or otherwise the Sri Lanka rupee continues to fall and closed today at 178.10 against the USD, which is a record low that has never been experienced in Sri Lanka. The central bank efforts to prop up the faltering currency has attempted to slow down foreign outflows. Rising US rates have not helped either. Reuters reported that despite the tightening, the rupee continues to drop which the news agency claims underscore growing pressure on the economy due to political turmoil. The central bank raised the Standing Lending Facility Rate ( SLFR) by 50 basis points to 9.00%, its highest since 2013 and increased the Standing Deposits Facility Rate (SDFR) by 75 basis points to 8.00%, its peak since 2009. The monetary authority also cut the Statutory Reserve Ratio (SRR) by 150 basis point to 6%, to cushion the impact of higher interest rates and boost credit demand. In a statement released by the Central Bank of Sri Lanka “The reduction in SRR is expected to release a substantial amount of rupee liquidity to the banking system, thus reducing the cost of funds of banks”