Opposition MP Dr. Harsha de Silva has raised concerns about the recent depreciation of the rupee, arguing that market confidence is becoming an increasingly important factor influencing the direction of the currency.
His remarks come as businesses, importers, exporters, and consumers closely monitor currency movements amid rising external sector pressures and higher global fuel costs.
Confidence and Currency Stability
According to de Silva, exchange rates are not determined solely by economic fundamentals such as exports, imports, and foreign reserves. He argued that confidence in economic management also plays a major role in shaping market behaviour.
He claimed that confidence in the government’s ability to maintain the value of the rupee was gradually weakening, creating additional pressure on the currency.
De Silva noted that recent policy measures, including higher interest rates, appeared to provide only temporary support before the rupee resumed its depreciation trend.
His comments highlight a broader economic reality: currency markets often react not only to current conditions but also to expectations about future developments.
Demand for Dollars Increasing
The MP also pointed to increasing demand for foreign currency from importers who are now settling Letters of Credit (LCs) opened before import restrictions were relaxed.
As more import payments enter the system, demand for dollars naturally rises, placing additional pressure on the exchange rate.
According to de Silva, market behaviour is also influenced by expectations surrounding future currency movements.
He claimed that some overseas workers were delaying remittances in anticipation of a weaker rupee, while certain exporters were also holding back export proceeds for similar reasons.
Why Expectations Matter
Economists often note that expectations can become self-reinforcing in currency markets. When businesses or individuals expect further depreciation, they may delay converting foreign currency earnings into rupees.
Such behaviour can temporarily reduce the supply of foreign exchange entering the market while demand remains elevated.
De Silva warned that these trends could further intensify pressure on the currency if confidence does not improve.
While policymakers continue to monitor exchange rate developments, the debate highlights the growing importance of market sentiment and expectations in determining currency stability.
For businesses and households, the direction of the rupee remains closely linked to inflation, import costs, fuel prices, and overall economic confidence in the months ahead.
Economic & Regulation Numbers & Indexes Opposition
Last modified: June 9, 2026
