According to the Central Bank Governor Nivard Cabraal, Sri Lanka has retained the confidence of foreign holders of government debt by taking firm corrective steps to fix a balance of payments crisis.
On Thursday the Central Bank raised policy rates by 95 basis points to 9.75 percent, a move that was called for by the International Monetary Fund, economic analysts and also the finance ministry.
The rupee which has been stable around 110 rupees to the US dollar fell to 131 rupees over the past several months after state borrowings spiked due to energy price manipulation amid strong private loan growth.
However, the rupee has now strengthened to around 125 to the US dollar from a low of 131 rupees, though there are concerns about central bank credit in April.
The central bank is expected to end all interventions in the forex markets in May, when the pressure of sterilized foreign sales on the exchange rate will also end.