Sri Lanka's rupee currency will be under pressure to appreciate due to the expected post-war influx of dollars to the country's service sector, the island nation's central bank chief economist said on Wednesday. Since the end of a 25-year war in May 2009, the $50 billion economy has yet to see large foreign direct investment, though the local currency has been kept steady via central bank intervention.
However, the central bank says high dollar inflows into the booming tourist industry and into port-related services should push the local currency to appreciate further.
"With more inflows, overall strengthening pressure will be there. We can't say how much or to what levels the rupee could rise," K.D. Ranasinghe, the central bank's chief economist, told Reuters in an interview.
The rupee has been allowed to appreciate gradually since the end of the war, which analysts and economists attribute to lure foreign investors and control import-inflation. The central bank, after maintaining an easing monetary policy since November 2008, signalled the start of policy tightening last week with raising commercial banks' reserve ratio by 1 percent to curb possible demand-driven inflation.