Sri Lanka’s rupee will reverse gains and plummet 20%, Fitch says

 

Sri Lanka’s rupee, which became the world’s best performing currency this year amid hopes of an International Monetary Fund bailout, may resume declines and lose a fifth of its value against the dollar by end-2023, according to Fitch Solutions.

“We are optimistic that Sri Lanka will be able to secure an IMF board approval by early 2Q 2023,” said Seah Wang Ting, country risk analyst at Fitch Solutions.

Nevertheless, there’s potential for disruptions after the initial board approval as authorities may find it challenging to stay on track with the IMF program amid a weakening economy and a local election likely on the horizon, he said.

Fitch maintained its forecast for the rupee to weaken to a record low of 390 per dollar by year-end. The rupee advanced 3% to 317.7 per dollar on Wednesday, taking its annual gains to over 15%.

That’s after the IMF said it plans to decide on a $2.9 billion bailout for Sri Lanka following China’s assurance that it will support the nation’s debt restructuring.