Sri Lanka’s rupee is expected to remain stable on a ‘very comfortable terrain’ in the coming years, with gross foreign exchange reserves forecast to exceed US $12 billion before capital repayments to creditors begin in 2029, according to the Sri Lanka Banks’ Association (SLBA) Chief and Standard Chartered Sri Lanka CEO Bingumal Thewarathanthri.
Despite potential challenges, including rising import demand and fluctuating oil prices amid tensions in the Middle East, Thewarathanthri expressed confidence that the rupee would remain resilient.
“It’s a very comfortable terrain for the rupee,” said Thewarathanthri, addressing attendees at the South Asian Apparel Leadership Forum during the Colombo Design Festival at Cinnamon Life. He emphasized the need for exporters to take into account the future trajectory of the rupee, noting that while a surge in import demand or an oil price spike could lead to some financial strain, the country’s currency is in a relatively strong position.
As of November 1, the Sri Lankan rupee had appreciated by 10.56% against the US dollar since the end of last year, making it the best-performing currency in emerging markets. The SLBA chief highlighted that Sri Lanka is running a surplus of about US $400 million in the current account, a rare achievement for the nation. He also forecasted that Sri Lanka could comfortably earn US $5-5.5 billion from tourism next year, with worker remittance inflows nearing pre-pandemic levels.
Further, Thewarathanthri predicted that Sri Lanka could cover its trade deficit with these inflows, despite a monthly trade deficit that has risen to approximately US $600 million. By December 2028, he anticipates the country’s gross official reserves could reach US $12-13 billion, ahead of the commencement of debt repayment in 2029.
The SLBA Chief added that Sri Lanka is well-positioned to absorb additional costs, such as an estimated US $1 billion from a rise in crude oil prices due to Middle Eastern tensions. With expected inflows from external debt restructuring and a potential credit rating upgrade by the end of this year, Sri Lanka’s economic outlook remains optimistic.