Central Bank of Sri Lanka (CBSL) has decided to announce a daily trading band for the exchange rate in order to prevent off market very high premiums being charged by exporters.
The band is reported to be based on the previous day’s price plus or minus a margin.
This measure would stabilize volatility according to the CBSL governor Dr Nandalal Weerasinghe.
This measure has been taken since exporters have got into a practice of instructing the banks to sell their dollars to third parties which is a violation of regulations. As a result of this practice scarce foreign exchange was being used to import items such as refrigerators while bank are unable to fund imports of life saving medicines, essential food items etc.
Establishing a trading band would increase transparency in the foreign exchange market.