Sri Lanka rupee at right level: CB Governor

May 07, 2009 (LBO) – The rupee is at the right level, central bank governor Nivard Cabraal said as the local currency floated between 116.50 to 117.70 rupees against the US dollar in spot trade Thursday.

Sri Lanka has asked for a 1.9 billion US dollar loan from the International Monetary Fund which reports said could be delayed by the United States.

But Jeff Anderson, a US embassy spokesman in Colombo said there was no question of the loan being blocked.

“We’ve never threatened publicly or privately that we will block the IMF loan,” he told the AFP news agency last week.

The US and other Western nations have been pressing Sri Lanka for a ceasefire in northeastern Sri Lanka where remaining Tamil Tiger guerillas are making a last stand using civilians as a human shield. “This is the right level. It has a good balance from all sides,” he told LBO shortly after returning from Libya.

Sri Lanka is negotiating a 500 million US dollar 15-year loan from the country.

Governor Cabraal says teams from the two countries are now working out the logistics of the loan and documentation is progressing.

He says the loan may come through as early as next month.

The local currency had settled to around 117.00/25 against the dollar by mid-day Thursday. The rupee peaked at 116.50 against the US currency before a state bank started to buy around 116.60, dealers said.

The rupee has been free floating from late March ahead of a loan from the International Monetary Fund.

A free float of the domestic currency is a standard ‘prior action’ before the IMF disburses a balance of payments support loan.