In a fresh directive given to lenders, the Sri Lankan central bank overturned a prohibition on FX transactions and permitted banks to sell forward to importers, putting an end to one of multiple cascading policy blunders that contributed to the country's economic crisis.

According to a circular sent to banks on March 22, the central bank has eased a limitation on banks providing forward insurance to importers. The central bank limited forward transactions and swaps to within-bank transactions from April 25, 2021. Banks could only sell dollars to customers up to the spot rate. Exporters were authorised to sell forward to banks. "On forward sales and purchases of foreign exchange by Licensed Commercial Banks, the banking direction is hereby rescinded," said Central Bank Governor Nivard Cabraal.

Cabraal eliminated bond price limits shortly after taking office, which was one of the primary catalysts of the current episode of monetary instability. The central bank stopped 203 to the US dollar peg in March, which was not credible due to money printed to enforce an excessively low policy rate in the face of a large budget deficit, which was exacerbated by a so-called "relief package" in another cascading policy blunder.

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