Sri Lanka’s rupee, which became the world’s best performing currency this year amid hopes of an International Monetary Fund bailout, may resume declines and lose almost a fourth of its value against the dollar by end-2023, according to Fitch Solutions, Bloomberg reported.
“We see the potential for disruptions in the IMF program,” Seah Wang Ting, country risk analyst at Fitch Solutions, said in an emailed response to questions. “Authorities have to remain committed to enacting tough reforms to stay on track with the IMF program. This might be politically challenging against the backdrop of a weakening economy and a local election likely on the horizon.”
Fitch maintained its forecast for the rupee to weaken about 23% to a record low of 390 per dollar by year-end. The rupee advanced 0.5% to 316.8 per dollar on Thursday, taking its annual gain to 14%. That’s after the IMF said it will decide on a $2.9 billion bailout for Sri Lanka on March 20 following China’s assurance that it will support the nation’s debt restructuring.
“Sri Lanka still has significant external debt repayment needs and will need to build up its foreign reserve buffer over the coming months, which would put downside pressure on the exchange rate,” Fitch said in a report Wednesday according to Bloomberg.
Bloomberg full report 👇
