Jan 04, 2011 (LBO) – Sri Lanka’s rupee is likely to further strengthen against the dollar in 2011 after gaining 3.1 percent against the greenback in 2010, Central Bank governor Nivard Cabraal said. Despite the rupee’s gains, export earnings increased last year, Cabraal said. “The exchange rate might have a gentle tendency to appreciate,” he said in a speech on the central bank’s monetary policy roadmap for this year.
The Sri Lanka rupee appreciated only gradually last year as the Central Bank absorbed foreign currency flows to avoid excessive rupee appreciation and built up foreign exchange reserves, he said.
“There was increased foreign exchange pressure on the rupee but we ensured it did not appreciate as much as it would have. Fortunately the rupee appreciated only around 3.1 percent,” Cabraal said.
“Exporters should be happy about that as it ensures some stability.”
Cabraal warned that exporters could no longer expect to increase earnings by relying on an annual depreciation of the rupee and he said maintaining exchange rate stability was in the national interest.
With the rupee strengthening, many institutions became quite eager to improve productivity.
No longer can the rupee’s depreciation ensure profits for exporters, he said.
“They have to make their own profits,” Cabraal said. “It means they must improve their own productivity. Profits will not come cheap by way of rupee depreciation but through efforts we take to develop our productivity.”