Economists warn soaring US Dollar rate could pressure Sri Lanka’s economy

Economists warn that if the Sri Lankan rupee continues to depreciate, fuel prices, electricity and water tariffs, as well as the prices of goods and services, could increase in the future.

Commenting on the situation, economic analyst Dhananath Fernando stated that the Central Bank’s (CBSL) purchase of dollars in the market and the excess liquidity of rupees in the financial system have increased the demand for US dollars, contributing to the weakening of the Sri Lankan Rupee.

He further explained that global geopolitical tensions have reduced foreign exchange inflows from the tourism industry compared to previous years, while challenges faced by the export sector have also led to a decline in dollar inflows into the country.

Fernando noted that the continued depreciation of the rupee could have a significant impact on fuel prices, particularly petrol and diesel, as Sri Lanka imports fuel using US dollars.

Speaking further, he said:

‘‘Petrol and diesel prices could be affected because fuel is imported in dollars, and prices are determined after converting them into rupees. Therefore, when the rupee depreciates, fuel prices rise accordingly. Higher fuel prices then contribute to inflation, leading to increases in electricity bills, water bills, and the prices of goods.’’

Meanwhile, the highest selling rate for the US dollar since December 22, 2023, was recorded today.

According to the Central Bank of Sri Lanka, the selling rate the US dollar today (15) stood at Rs. 331.15.

Yesterday, the selling rate of the US dollar had already risen to Rs. 329.92.