Former Deputy Governor of the Central Bank of Sri Lanka W. A. Wijewardena has said that the Central Bank of Sri Lanka should take immediate action to prevent the rupee from continuing to depreciate against the US dollar.
Mr. Wijewardene also said that the three steps needed to be taken as soon as possible: the Central Bank raising interest rates, making an official declaration of borrowing from the International Monetary Fund and the Central Bank refraining from taking dollars from commercial banks.
He said that as the Central Bank’s interest rates were 7.5% and that interest rates on commercial bank deposits had been reduced to 6%, foreign employees from Sri Lanka has stopped depositing money in local banks.
Therefore, the Central Bank interest rate should be increased by 15% and the deposit interest rate should at least be doubled, he said.
He also said that foreign workers would be interested in sending dollars to Sri Lanka as they feel that the rupee would stop from depreciating if the government or the Central Bank publicly state that they are burrowing from International Monetary Fund.
He also said that the Central Bank’s directive that 50% of US dollars held by commercial banks must be sold to the Central Bank should be lifted immediately.
Mr. Wijewardene said such an order would reduce the dollar reserves of commercial banks and it will make things worse.
