The Central Bank of Sri Lanka announced that it would allow 'greater flexibility in the exchange rate', allowing the Sri Lankan rupee to be exchanged at 230 per dollar, from its previous fixed rate of 201, effectively weakening the currency. 

The Central Bank of Sri Lanka said in a statement last Monday that “greater flexibility in the exchange rate will be allowed to the markets with immediate effect.” The central bank also said it’s “of the view” that transactions would be capped at 230 rupees per dollar, about 12% below the current market level of 201.49 rupees.

The devaluing of the LKR comes as the Island debt obligations, which the International Monetary Fund has described as 'Unsustainable' is becoming harder to meet. The Rajapaksa regime has provided over a spiralling economic crisis which has led to foreign reserves shrinking to record lows and shortages of vital imports. The latter has led to severe shortages of medicine, food and fuel leading to widespread power outages. In recent weeks protests have been held across the island against the regime's mismanagement of the economy. 

Sri Lanka’s dollar-denominated debt repayments due this year total more than $6 billion, including a sovereign bond of $1 billion maturing in July. The government has so far relied on bilateral loans to bolster its finances, including from India and China, whilst actively shunning the IMF, despite this a senior IMF official is set to visit the island this week to brief the government.

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