Sri Lanka allows rupee to devalue

COLOMBO, March 8: Sri Lanka's central bank has allowed the rupee to devalue to 230 per U.S. dollar considering the severity of the external shocks and recent developments domestically.

The central bank said on Monday it will closely monitor the emerging macroeconomic and financial market developments, both globally and domestically, and will stand ready to take further measures as appropriate.

The aim is to achieve stability in inflation, the external sector, the financial sector, and real economic activity, according to the bank.

"In that context, greater flexibility in the exchange rate will be allowed to the markets with immediate effect. The central bank is also of the view that forex transactions would take place at levels which are not more than 230 rupees per U.S. dollar," the central bank said in a statement.

Earlier the rupee was pegged to the dollar at 200. A number of Sri Lankan economists have been urging the government to devalue the rupee in the past few months, stating that this policy was creating forex shortages and parallel exchange rates.