Implementing economic reforms is essential to ease pressure on the Sri Lankan Rupee, economist Dhananath Fernando stated.

Fernando has also called for local fuel prices to be aligned with global market rates, arguing that such a move would help reduce pressure on the currency and support broader macroeconomic stability.

In a statement to the media, Fernando noted that maintaining fuel prices below international levels can create fiscal strain and distort market mechanisms, ultimately increasing pressure on state finances and foreign exchange reserves.

He added that while fuel price increases are not popular decisions, they are necessary given the significant pressure on the Rupee.

Fernando further explained that when the US Dollar exchange rate increases even marginally, exporters may delay converting their foreign currency earnings, while importers tend to accelerate dollar purchases, thereby increasing demand pressure on the Sri Lanka Rupee.

Referring to recent currency movements, he said the rupee depreciated sharply on May 21 and 22 before later appreciating. He added that, according to the latest data, the Central Bank of Sri Lanka (CBSL) intervened in the market during May by selling nearly US$ 220 million.

He explained that this intervention effectively absorbed liquidity from the market, which he said may have contributed to the rupee’s subsequent appreciation.