Selling imported petroleum at a loss prevents a contraction of disposable incomes of energy users which then generates imports.
Though energy prices were raised, Petroleum minister Susil Premajayantha has said that state-run Ceylon Petroleum Corporation has run up debts of 65 billion rupees with state enterprises again this year.
However the Central Bank has tightened the monetary system a little in recent days with the average rate of its repo auction to drain liquidity moving up to 8.
85 percent on June 07 from 8.60 percent on May 21.
On Monday the interbank markets were short and some players borrowed at 9.
75 percent from the Central Bank's liquidity window.
Call money rates have moved as high as 10.15 percent Monday and gilt backed repo rates were around 9.00 to 9.10 percent Monday.
On Tuesday repos were quoted around 9.20/30 percent, still below the 9.75 percent window level and clean call money at 10.20/30 percent levels, dealers said.
The rupee recovered to 132.90 levels after a state bank sold dollars.
Central Bank governor Nivard Cabraal said emerging economic data is showing that imports are falling faster than exports and the rupee should gain strength.
"The adjustment in the economy is taking place very clearly as envisaged so very soon, it will be felt by all economic players," he said.
"In that context, it is only a matter of time, before importers realize that the rupee should strengthen, and then it is likely that they will not pay as much."
Analysts have urged the Central Bank to sterilize any foreign exchange purchases they make with immediate outright sales of its Treasury bill stock to prevent the notes from coming back for redemption as imports after being loaned out to the credit system.
In April private sector credit fell to near two year low of 18.7 billion rupees but credit to state was still strong at around 42 billion rupees.