• Rising imports, debt servicing, and accommodative monetary policy to pressure the currency
• Rupee ranked as worst-performing emerging market currency in January

Sri Lanka’s rupee is expected to depreciate in 2025 with the surge in import demand and servicing external debt reversing the gains it had in 2024, Bloomberg Economics said.

Accordingly, the research arm of Bloomberg said that an expected surge in imports, resumption of external debt servicing and the need to buy more dollars to build foreign exchange reserves will increase demand for dollars depreciating the rupee.

“At the same time, the Central Bank’s accommodative monetary policy may discourage foreign flows into the country’s assets,” it added.

In addition, Bloomberg Economics said other risk factors such as a significant blow to exports from US President Donald Trump’s trade policies and a continued surge in oil prices due to any escalation in geopolitical conflicts could hit the rupee hard.

Moreover, Bloomberg Market data showed that the Sri Lankan rupee was seen as the worst-performing emerging market currency by the end of the fourth week of January after recording a negative spot return of 1.72%.

This was after the rupee ended 2024 as the top-performing emerging market currency with a 10.85% return.

Other worst-performing emerging market currencies were the Argentine peso and Turkish lira with negative spot returns of 1.46% and 0.89% respectively.

The Russian ruble was the top emerging market currency so far in 2025 with a 16.07% spot return, while the Colombian peso took second place with a 5.45% return.