Sri Lankan rupee (LKR) might hit 350 levels per US dollar (USD) in the second half (H2) of 2024 due to an increase in spending power owing to low-interest rates and relaxation in taxes and power bills in lieu of elections, Capital Alliance Limited (CAL) Chief Strategist Udeeshan Jonas said.

Speaking at a webinar organised by CAL on Sunday (11), he said that the rupee which has appreciated in the last few weeks due to a drop in imports might see a depreciation going into the second half of the year.

“We think that currency might hit that 350 (per USD) kind of level again owing to a few reasons," he said.

He added that because import numbers were very low in January due to the impact of taxation, not much pressure was exerted on the currency.

Since 22 January, the rupee has appreciated by about 2,5%, while the Central Bank has only purchased dollars worth $ 245 million from the market in the month of January.

“In the second half (of 2024), when we see the benefits of low-interest rates, easing that Government might do in lieu of elections, particularly on cutting down a little bit of taxation and electricity tariffs and so on, might improve the spending and with spending, you will see imports coming back again,” Jonas said.

He said that with imports coming back and Sri Lanka concluding external debt restructuring by the second quarter, “will mean that we need to start paying the interest component on foreign-denominated debt, which is roughly about $ 80 million outflows we will see going into the second H2 of 2024,” he added. 

Further, he said that the Government may also look at easing vehicle imports, where certain components might be allowed to be imported which will also start exerting pressure on the currency.

“We believe the currency might reach back again to 350-360 (per USD) by the end of the year,” he said.