Vehicle Import LCs Higher Than Forecast, But Demand Now Stabilizing: CBSL

COLOMBO (News 1st); Responding to questions on whether higher-than-expected Letters of Credit (LCs) for vehicle imports contributed to rupee depreciation, Dr. Nandalal Weerasinghe, Governor of the Central Bank of Sri Lanka, said the exchange rate is determined by market demand and supply dynamics.

“There is strong demand for foreign exchange due to imports and other factors, but remittances, tourism, and exports are performing well, creating a balance,” he noted.

While short-term volatility occurs, the Central Bank intervenes only to smooth disorderly adjustments.

Dr. Weerasinghe emphasized that Sri Lanka is projected to record a current account surplus of over USD 1 billion (around 1% of GDP) this year, supported by inflows from remittances, tourism, and exports. 

However, rising import demand—partly from motor vehicles—reflects economic recovery and credit growth, which naturally influences the exchange rate.

“This year we’ve seen about a 5% gradual depreciation, which is normal under a flexible regime. The exchange rate moves both ways—it’s not one-directional,” he said, citing past fluctuations from Rs 370 to 280, then 329, and back to 290 before stabilizing.

On vehicle imports, the Governor acknowledged that LC volumes were higher than initial estimates (USD 1.2–1.5 billion) due to pent-up demand, with a surge in July–September.

“Now LC numbers are coming down, and we expect import demand to stabilize in the coming months,” he added.