June 6 (Reuters) – Sri Lankan currency gained on Monday as investor sentiment got a boost after the International Monetary Fund approved a three-year, $1.5 billion loan over the weekend, in a move that is expected help support the country’s reform agenda.
The IMF executive board has approved the loan, the global lender said on Saturday, with the South Asian nation hit by a balance-of-payments crisis.
The main objectives of the programme are reforms aimed at boosting government revenues to reduce the fiscal deficit, improving foreign exchange reserves, reducing public debt and SriLanka‘s risk of debt distress, and improving public financial management.
The dollar/rupee forwards, known as spot next, were trading at 146.00/40 per dollar at 0621 GMT, compared with Friday’s close of 147.00/05.
Spot next, which acts as a proxy for the spot currency, indicates the exchange rate for the day following conventional spot settlement, which is three days ahead for Monday’s trade.
The spot currency did not trade on Monday.
“There is dollar selling in the market. Some are selling, with the expectations of the IMF money strengthening the rupee,” a currency dealer said.
Dealers said it was unclear how the IMF loan would impact the rupee over the long term as there was still no clarity on the conditions imposed by the lender.
The IMF said the transition to flexible inflation targeting under a flexible exchange rate regime was one of the pillars of the loan program.