The dollar exchange rate for the rupee shot up sharply yesterday, with dealers quoting high prices, raising fresh concern and confusion among the import and export trade.

The Central Bank yesterday indicated Telegraphic Transfer (TT) buying rate of dollar as Rs. 198.19 and selling rate as Rs. 202.89. However commercial banks were quoting Rs. 211 as selling rate for TT, reflecting a difference of over Rs. 8 on the latter. 

Dealers admitted the rupee depreciated sharply. “Local commercial banks were selling dollars at around Rs. 211 while foreign banks were selling it around Rs. 215,” the import and export trade confirmed. 

Late last week there was speculation that Central Bank had requested commercial banks to give a realistic rate but CEOs denied any such notification. Speculation was that banks had been asked to devalue the rupee from Rs. 203 to the US Dollar to Rs. 211. In the grey market the dollar was trading at between Rs. 220 and Rs. 243. 

The Central Bank last week said during the year up to 13 August, the rupee recorded a depreciation of 6.8% against the dollar. Last week the official selling rate of the dollar was Rs. 202.90 as against Rs. 183 a year ago.

The wide disparity between official rate and that in the grey market is of concern in the banking sector. 

Sources said that this could be one reason why workers’ remittances had been on the decline year-on-year since June. 

As per the Central Bank, workers’ remittances decreased to $ 478 million, recording a year-on-year decline of 16.4% in June 2021. However, workers’ remittances in June 2021 remained higher than the $ 460 million recorded in May 2021. During the first half of the year, workers’ remittances recorded a growth of 11.6%, year-on-year, to $ 3.32 billion.

Due to shortage of currency, the average daily interbank forex volume last week was $ 9.4 million, down from $ 13 million in the previous week and $ 59 million a year ago.

Following the settlement of $ 1 billion International Sovereign Bonds (ISBs) last month as well as expenditure on essential imports, the country’s Gross Official Foreign Reserves fell to $ 2.8 billion as at end July. This figure however does not include the swap facility signed with the People’s Bank of China (PBoC) of RMB 10 billion (equivalent to approximately $ 1.5 billion).

Uncertainty in the forex market is despite repeated assurance by the Government and the Central Bank that future pipeline of foreign inflows is robust.

In June the Central Bank revealed a pipeline of over $ 3 billion. It included the SWAP facility of $ 250 million from the Bangladesh Bank, the SAARC Finance SWAP facility from the Reserve Bank of India (RBI); special SWAP facility of $ 1 billion from India; and $ 800 million under the IMF SDR allocation, apart from $ 700 million from other measures. 

Yesterday the Sri Lanka Embassy in China announced that Ambassador Dr. Palitha Kohona signed a RMB 2 billion (Rs. 61.5 billion) term facility agreement with China Development Bank.

SL signs deal for Rs. 61.5 b support from China Development Bank