Foreign exchange rates in which the rupee reached a high of Rs.120 to the dollar this week is most likely due to import demand, bankers said. “There appears to be some demand coming but we don’t know from where,” a senior banker told The Sunday Times FT. “All this demand is coming from consumption so obviously, it has to be met within the market.” The Central Bank (CB) is also not intervening most probably having been asked not to by the International Monetary Fund (IMF), he said.
He added that it is difficult to speculate what might happen to the foreign exchange rates over the next few weeks as the IMF conditions for the US$1.9 billion stand-by loan facility remain unknown. “There is a little bit of nervousness in the market because people don’t know what the conditions are.” The IMF team which is scheduled to come to Sri Lanka next week might be here to make sure the government does not take loans from the CB. “The IMF wants to make sure that what they want is done. They want to make sure that the loan is to support the balance of payments,” he added.
He added that in Pakistan, one of the IMF conditions for a loan was to settle all of its petroleum bills in the market without taking any dollar loans. He speculated that this might also be one of the conditions for Sri Lanka. “It makes sense. If we are consuming petroleum, then we should be settling the bills.” He said the total volume of the petroleum bill for Sri Lanka is lower now although exports remain down.
In terms of exports, the tea industry is selling in the market and prices remain satisfactory. “The tea industry is not grumbling so they must be given credit,” he said. “I’m not sure about the rest of the exporters.”
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