Sri Lankan Rupee depreciation was accelerated by COVID-19 pandemic saw a small appreciation against the US Dollar; a significant change after falling as low as 200.50 a week early. According to the daily exchange report of the Central Bank of Sri Lanka (CBSL) the current selling rate of US Dollar Rs 195.78 and buying rate is recorded at Rs 188.51, reports the Central Bank. Although the exact reason has not been announced yet, analysts say the US$ 422 million amount received by LOLC Group as the first tranche from the sale of its 70% stake in Cambodia’s largest Microfinance Company, PRASAC may have helped to strengthen the rupee.
Whereas the story depicted in the above Graph, measured against the right-hand side scale, is the relative price movement between Sri Lanka and USA. From 1947 to 1976, both countries had a similar price changes and therefore, the relative price curve has remained flat. During this period, the exchange rate too has been more or less stable, according to data on the formal exchange rate between Sri Lanka rupee and the US dollar.
However, as explained above, this is a misleading conclusion since during this period, the exchange market was not stable as demonstrated by the need for resorting to exchange and import controls, on the one hand, and using multiple exchange rate practices, on the other.
From 1977 onward after the exchange rate was freed from the strict government controls, the rate has continued to depreciate almost one for one with the increase in price changes in Sri Lanka vis-à-vis those in USA. In other words, the culprit in Sri Lanka’s continued rupee depreciation has been the higher inflation rate within the country compared to USA.
Bitter truth is long before COVID-19 pandemic rocked the world the writing was on the wall, in particular for the little island nation Sri Lanka that was a paradise in the Indian Ocean. Then in year 1947 it was called Ceylon under British rule, a leading nation in Asia, that was well placed economically.
Then in 1948 Britain opted to give independence to the paradise island and handed power to the elite leaders to govern it. Regrettably these western oriented gentlemen (or WOG in short) as elite leaders failed miserably and today after seven decades the country is ruined heavily in debts to big nations, is struggling to meet the monthly repayments.
For the first time in the history of the island nation there is a non politician elected as the President by the people to be the Head of State. Within months of taking power, the new President was pushed to the deep end by the COVID19 virus pandemic. Fortunately, the President has so far handled the pandemic well to keep it under control, that has pushed him above many world leaders accrediting him for keeping the virus outbreak under control. Although battle is far from over credit must go to the health authorities and all supporting services as the tri-forces and police.
Sri Lankan citizens are confident that the little island nation will unite under the influence of the country’s new President to overcome the COVID-19 virus spread and thereafter join together to rebuild the country’s economy after the general election, due to be held by middle of this year. True is an uphill task, but possible if people think out of box to elect quality representatives to represent them in the parliament.