Sri Lanka's central bank said on Thursday it was shifting the focus of its foreign exchange policy to allow the market to determine the currency's rate, removing a point of friction with international lenders and relieving pressure on its fast dwindling reserves.
The bank has so far been defending a certain price level by selling dollars and has spent more than $2.7 billion, or a third of its reserves, since July, attracting criticism from the International Monetary Fund (IMF) which had urged Colombo to allow more flexibility in the exchange rate.
"We used to support intervention on a rupee price, and now we are going to be intervening based on a quantity," Governor Ajith Nivard Cabraal told Reuters, adding that the bank will intervene only to meet any shortage in the currency market for the country's oil bills.
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