Central Bank Former Governor Ajith Nivard Cabraal yesterday reiterated that flotation of the rupee was a decision by the Monetary Board and the new regime too was sticking to the same course. 

Making a statement to clarify the background of the decision to provide greater flexibility in the exchange rate as announced by the Central Bank on 7 March 2022, Cabraal said it is to be noted that the Monetary Board decided on 7 March to “allow the market to have a greater flexibility in the exchange rate with immediate effect and communicate that the Central Bank is of the view that forex transactions would take place at levels which are not more than Rs. 230 per dollar”. On the same day, an announcement was made to the media in line with the above decision. Refer: https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/press/pr/press_20220307_policy_package_to_support_greater_macroeconomic_stability_e.pdf

From the above it will be clear that, while the Monetary Board had, as a market guidance, expressed its “view” as to the level at which forex transactions would take place, a clear decision had been taken to allow for the flexibility of the rupee in the Forex market. 

It would also be noted that from 8 April onwards, the Monetary Board under the new Governor and new Secretary, Treasury have continued with the above exchange rate policy, without fixing a specified exchange rate, as was the case immediately prior to 7 March, Cabraal’s statement added.   

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