Thread by @Economynext

Central Bank of Sri Lanka explains the Background, Positive Impact, and Expected Outcomes of The Current Exchange Rate Arrangement.
@CBSL #SriLanka #Economy #SLNews #NewsAlert

#SriLanka @CBSL says The outcome of the initially allowed exchange rate flexibility fell short of expectations due to large overshooting by market forces and the delay in market correction. @CBSL #SriLanka #Economy #SLNews #NewsAlert

#SriLanka @CBSL says further pressures were added due to: forex shortages, continuous depreciation of exchange rate, delays of forex conversions by forex holders and high premium offered in the grey market. #Economy #SLNews #NewsAlert

#SriLanka @CBSL says undue speculation on the currency was created by increasing interbank, buying, and selling rates, due to the volatility of exchange rates caused by popularity of grey market transactions. #Economy #SLNews #NewsAlert

#SriLanka @CBSL says commenced providing daily guidance to licensed commercial banks on the degree of volatility from 13 May 2022 based on exchange rate determined in the interbank market on the preceding day. #Economy #SLNews #NewsAlert

#SriLanka @CBSL says The commercial banks have the prerogative to determine the interbank spot market exchange rate. #Economy #SLNews #NewsAlert

#SriLanka @CBSL says that this arrangement brought in a greater stability in the exchange rate determination in both the formal market and the grey market while the minimizing excessive margins that prevailed in both markets. #Economy #SLNews #NewsAlert

#SriLanka @CBSL says the effects of the same are expected to reflect in the exchange rates used for customer transactions. #Economy #SLNews #NewsAlert

#SriLanka @CBSL says inflows of workers’ remittances to the banking system have gathered pace since the introduction of the new exchange rate arrangement, while conversions have improved. #Economy #SLNews #NewsAlert

#SriLanka @CBSL says import expenditure has declined notably in May 2022 compared to April 2022, according to provisional data from Sri Lanka Customs. #Economy #SLNews #NewsAlert

#SriLanka @CBSL says Complementary measures such as restrictions imposed on open accounts and consignment payments terms have helped curtail activity in the grey market, narrowing the gap between the official exchange rate and the grey market rate. #Economy #SLNews #NewsAlert

#SriLanka @CBSL says the current exchange rate arrangement is viewed as a more credible mechanism, vis-a-vis an arrangement where grey market activity could operate freely. #Economy #SLNews #NewsAlert

#SriLanka @CBSL says a further market based correction is expected. #Economy #SLNews #NewsAlert

#SriLanka @CBSL says expects improved momentum in the domestic forex market to have a favorable affect on discussions with the International Monetary Fund (IMF) @IMFNews and negotiations for bridging finance with other multilateral and bilateral partners. #Economy #SLNews

#SriLanka @CBSL says would like to reiterate that the current arrangement of exchange rate would be reviewed from time to time, and further flexibility would be allowed if need be, once market confidence is restored, supported by envisaged foreign exchange inflows to the country.