20 May, 2022

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Collapse Of The Rupee: Is It Sudden Or Orchestrated By Central Bank?

By W. A Wijewardena –

Dr. W A Wijewardena

Claiming the controlled dollar-rupee rate as a success story

Sri Lanka rupee has collapsed in the foreign exchange market in the first week of March. Before that, the Central Bank has published data every day in its website that the buying and selling rates of the dollars by commercial banks as Rs. 197 and Rs. 203, respectively, though dollars were not available at those rates in the banking system. If anybody wanted dollars in a hurry, he had to look for them in the parallel black market at which dollars were bought and sold freely at rates ranging between Rs. 250-260. This illusive rate published by the Central Bank in its website has been described by the Bank’s Director of Economic Research as a success story of maintaining the stability of the rupee for 11 long months.

Prior to his explanation, the Bank’s Governor Ajith Nivard Cabraal in the same very short video clip has described it as fulfilling the Bank’s mission of maintaining the economic and price stability and financial system stability.

True meaning of ‘economic and price stability’: No excess demand or excess supply

I have clarified in a previous article that what is meant by economic and price stability is not just maintaining inflation rate mechanically at a low level but maintaining the macroeconomic stability in all the sectors in the economy, namely, the fiscal sector, domestic monetary sector, and the external sector, so that there is no excess demand or excess supply in the goods market. If there is excess demand or excess supply in the market arising from an imbalance in any of the sub-sectors in the economy, the Bank has not attained its objective of economic and price stability.

Since all these three sectors have been in imbalance – budget running at an average deficit of about 11% of GDP, money supply expanding at 40%, and external sector having an overall deficit of $ 8.2 billion in the 25-month period from December 2019 – there had been continued excess demand in the economy causing the inflation to rise at about 17% and exchange rate to depreciate massively in the market. Hence, the claim concerning the attainment of this objective by the Central Bank has been far from the reality. Surely, when there is a massive black market outside the formal system and when there are queues for essential goods, no central bank can claim that it has attained its objectives. Does this mean that the top leadership of the Central Bank, including those sitting on the Monetary Board, should go back to school and re-educate itself of the first principles of central banking?

The failed homegrown strategy

The present collapse of the rupee has not been totally unexpected. For many months, independent analysts had warned the Government and the Central Bank about its insane attempt at fixing the rupee-dollar rate at 200 at mid-level without a supportive foreign exchange reserve.

But the Bank had adamantly maintained and misled the President too that it has enough resources at hand to keep the rate at that level and there is no necessity for Sri Lanka to seek IMF support or work on restructuring the country’s foreign debt. Governor W.D. Lakshman ascribed this to following an alternative policy measure which only he knew of; Governor Cabraal said that it was a homegrown policy, and gave the market of the main ingredient of that policy in his Six-Month Road Map announced on 1 October 2021.

That main ingredient was to seek temporary funding from friendly neighbours and central banks. The risk of that homegrown policy was that if they did not materialise in sufficient amounts, the rupee should collapse in the market without support. This is what happened to the rupee in the first week of March 2022. The Central Bank has now stopped publishing that fictitious rate of 197-203 in its website. Instead, the rates published now are 250 and 260. But the commercial banking sources indicate that the actual over the counter rates have moved up to 265 and 275 per dollar.

Meanwhile, on the first day of floating, the rates in the parallel black market had converged with these two rates. However, since then, the black-market rates have jumped up over the formal sector’s rate since there was not enough foreign exchange with banks. That is because the Central Bank had let the rupee have a freefall without other supportive policies like increasing interest rates and seeking a funding line from IMF. Hence, the black market is still very active and the existence of such a parallel market is the worst enemy of a central bank because it thwarts the efficacy of its policy actions.

Is floating a taboo word?

What has happened is the floating of the rupee because the rates are now determined by the market in response to the demand for and the supply of foreign exchange. Floating is not a simple task, and much work must be done to make it a success as a macroeconomic tool. But the short video clip which the Bank has released to the market shows that the Bank has been unaware of what had been happening in the marketplace. That is why both the Governor and the Economic Research Director say that they have made the rupee-dollar rate more flexible and not floating, probably floating may be a taboo word.

This is simply reverting to the period from 1977 to 2001 during which the country was having a flexible exchange rate system. But the rupee was fully floated in January 2001 when the late A.S. Jayawardena was the Governor. He meticulously planned it for a few weeks prior to final floating. Hence, looking at how he did it may be a useful re-education program for all of us.

The floating saga in 2001

Prior to 2001, the Central Bank has been announcing daily its buying and selling rates of dollars as per the provisions of the Monetary Law Act. Commercial banks had to keep their rates around the rates announced by the Central Bank. However, due to a chronic balance of payments problem, the Central Bank had to supply foreign exchange regularly to the market to keep the exchange rate at levels it had been announcing to the market. If the Bank could not supply foreign exchange to the market at the given rates, the result was either the rate had to move up or allow the development of a black market dealing in foreign currencies. Since the Bank did not want a black market to develop because it is the worst enemy of a central bank, it allowed the rates to go up by widening the margin between its buying and selling rates from time to time.

Accordingly, the margin was widened from 2% to 5% in June 2000, to 6% in November and to 10% in January 2001. But each time when the margin was widened, the operating rates of commercial banks moved up to the selling rate of the Central Bank indicating that the rupee is under increased pressure for depreciation. The result was what is now known as being hit by a double whammy: the Bank was losing reserves and at the same time, the rupee was depreciating. The same double whammies had been attacking the Central Bank in the current period too: it was losing reserves and the rupee was under pressure for continued depreciation. But today’s Bank had been hiding this latter factor from itself by posting a non-existent exchange rate in the market to its website. The result was the development of a vibrant black market in foreign currencies.

A.S. Jayawardena: Falling reserves and black markets are the worst enemies of a central bank

But reserves fell at a rate and Governor Jayawardena did not like it. In 1998, the reserve level was $ 2 billion; it fell to $ 1.6 billion in 1999 and further to $ 1 billion in 2000. At the same time, rupee was also depreciating from Rs. 68 a dollar in 1998 to Rs. 72 in 1999 and further to Rs. 80 in 2000. So, you cannot hold onto both the reserves and the dollar. If you hold onto the dollar, you will lose reserves driving the country to an irrecoverable risky situation. If you lose reserves, you will lose everything, sovereignty, freedom, economy and so on.

Above all, without reserves, you will not be able to continue with the import program that will create shortage of both inputs for industries and essential consumer goods for consumers. It will lead to other unintended consequences, namely, queues, black markets and smuggling of the goods into the country. They were all the worst enemies of a central bank. Governor Jayawardena did not want to place the Central Bank in this risky situation.

He had discussions with the IMF, got into a program with the Fund, and made preparatory work for floating the rupee for the first time since 1977. He also convinced President Chandrika Bandaranaike Kumaratunga who was the Minister of Finance as well of the need for floating the rupee. The most important act he accomplished in this exercise was getting the support of Dr. P.B. Jayasundara who was the Secretary to Ministry of Finance cum official member of the Monetary Board. Governor Jayawardena knew that without their support, the whole exercise would fail.

Don’t put a vehicle to a road if brakes are not in order

After completing this initial work, he got the Monetary Board to increase the Bank rate, the equivalent of today’s Standing Lending Facility Rate of the Central Bank, from 16% to 25%. The reason was to eliminate the speculative elements in the market by making speculation more costly. If they kept money outside, the local cost of financing the activities was raised to a higher level. I recall how Governor Jayawardena responded to a call from anxious President Chandrika who wanted to know why he was delaying the announcement of the floating of the rupee. I was present in his room at that time. He said confidently, ‘Madam, I don’t want to put the vehicle onto the road until I’m convinced that the brakes are in proper order’. In other words, if the things would go wrong, he had to apply the brakes and stop the disorderly depreciation of the rupee. Also, he told President Chandrika that if the vehicle went down a cliff, he now had a tree nearby in the name of IMF to stop it by crashing to that tree. That was a risk mitigation mechanism.

IMF supporting the floating

On 23 January 2001, Governor Jayawardena went for the floating of the rupee. He did so by making the announcement at 7 a.m. that the Central Bank will stop from that day onward the announcement of the Bank’s buying and selling rates of US dollars. Instead, the Bank would report on its website the weighted average of the buying and selling rates of dollars by commercial banks as an indicative rate. Outside the Central Bank, only Chandrika and PB knew of this. Even the Deputy Minister of Finance – Prof. G.L. Peiris – was briefed of the change just 10 minutes before 7 a.m. only as a courtesy.

The secrecy in the entire work was necessary because if others knew of this change, they could have made money out of the floating. So, it was done with the minimum number of people knowing about it and after the markets were open, the rate increased to Rs. 98 per dollar. But IMF issued a statement saying that it would welcome the decision to float the currency and it would stand by Sri Lanka in this exercise. It eliminated the speculative elements from the market. The rate began to appreciate and settled at Rs. 88 by 12 February 2001. Reserves started building and at end-2001, they were at $ 1.3 billion, at end-2002, $ 1.7 billion and at end-2003, $ 2.3 billion.

The legal hurdle

But the Bank ran into a legal hurdle too. In terms of the Monetary Law Act that had been enacted in 1949, the Bank should announce its buying and selling rates daily. But the Act was silent about whether the Band could refrain itself from making that announcement. Hence, when it stopped making this announcement, there was the risk of someone taking the Bank to courts. Governor Jayawardena assessed this risk and decided to fight it at courts if someone decided to challenge the Bank’s action. He felt that the Bank had a strong case on two counts.

First, the markets have changed in their structure since the enactment of MLA in 1949 from a fixed exchange rate system to a floating exchange rate system. Second, the courts may appreciate the necessity for ignoring archaic laws if they stood in the way for progress in the current period. Hence, the announcement was made as previously decided.

But an opposition Parliamentarian took the Bank to courts and the case got dragged on. Then, the very same Parliamentarian became a part of the government that seized power at the general elections held subsequently and he chose to go into a settlement with the Bank. However, as a permanent measure, MLA was amended in 2002 suitably under that new government removing the legal impediment.

A lot more to be done

Today, rates are rising in the market day after day. Hence, the Central Bank should immediately apprise the Government of the need for negotiating a financial facility with IMF, that cannot wait until Finance Minister Basil Rajapaksa goes to Washington DC for Spring Meetings of IMF and the World Bank, increase interest rates to eliminate both the black market and speculative elements, and return to the tax system that had prevailed prior to 2019.

The address to the nation by President Gotabaya Rajapaksa last week was vague about the Government’s seeking a funding facility from IMF immediately. He said that the Government was willing to work with IMF referring to the Fund’s role as the provider of technical support to member countries. This was wrongly read by local media as his going to IMF for a loan facility. That confusion will make the foreign investors more confused. It could not make a significant turnaround in the falling prices of ISBs out there in the market. It at all helped the prices to mark a marginal improvement only. In the meantime, Finance Minister Basil Rajapaksa who made a begging visit to India was successful in getting $ 1 billion from the State Bank of India guaranteed by the central government.

Though this loan is useful, it will not help Sri Lanka to solve its acute foreign exchange problem on a permanent basis since, as reported, it is for import of essentials from India and repayable in three years. For practical purposes, it is a three-year trade credit and cannot be counted for calculating Sri Lanka’s foreign reserves.

Hence for rescuing Sri Lanka from the present acute foreign exchange crisis, there is no alternative other than getting a longer-term loan from IMF. Without that, the Central Bank has allowed the kite to float freely in the sky without direction. Even at the time this article is going to press, the over-the-counter rupee-dollar rate has moved up to Rs. 285 and settled at that level. Hence, the expected reversal of the fall of the rupee does not seem to be taking place further adding to uncertainty in the market. That is a risk which should be avoided at any cost.

*The writer, a former Deputy Governor of the Central Bank of Sri Lanka, can be reached at waw1949@gmail.com

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Latest comments

  • 5
    11

    It looks like someone is shorting the currency. It could be an effort to destabalise the island. There is something going on that is beyond the normal visibility.

    • 13
      3

      “…..It looks like someone is shorting the currency. It could be an effort to destabalise the island….”
      Sure!
      We call them bloody Rajapaksha gang!!

      • 3
        0

        Yeah, money of the hard-working suffering Lankan Masses is encrypted inCrypto in virtual Russian Cyber-banks, curtesy Rajapaksa Oligarchy. India loaned the US$$$1-Billion so they can eventually wrench the take-over of either the Crypto or Island, or both.

    • 4
      0

      Jambu,
      “There is something going on that is beyond the normal visibility.”
      The only thing one cannot see as ‘Black and White’, is that remitters, mostly SL’s employed overseas, have lost trust in the ‘system’ over 1½ years of ‘pegged’ unrealistic dollar, and forcibly acquisitioned 20% of the US $ funds in commercial banks in private NRFC and other accounts by the state!!!
      It’s no secret you need time to build the TRUST for people to confidently remit and deposit. Then the question of ‘convertibility’ of the SL Rs and US $ remains a big question, which Cabal and the clan has dissipated to protect the US $ unrealistic rate, the whole of 2020 and 2021!!!
      Cabral and BR’s word does not Gel with these guys and no one would part with their HARD EARNED MONEY AND DOLLARS on a ‘state’ which keeps on turning blue, green, yellow and red every time wind direction changes (Chameleon like ) and lacks disciplined Fiscal policy????!!!!

    • 4
      0

      Jumbo,
      Good Morning.
      Sure agree, there is ‘Monkeying’ in the system.
      CBSL calls this ‘Monkeying’ as ‘trying out’ (experimenting) Local solutions or a 6 month “Road Map”, without a Map or sketch and Road to Oblivion, as could be seen!!
      They are pursuing in this exercise and the trip looks rudderless and meandering without focus!!!!
      CBSL now is a monetary institution turned to an academy to educate Chartered and Management accountants to be highly professional economists to turn around the struggling economy!!!
      In this ‘Monkeying’ process they have been successful in losing totally, the SL “Pot of Gold”, reserves in trying to save the dollar rate which is in free fall right now!
      Without much touted reserves and the ‘magic’ recovery they are staring at losing the countries’ Sovereignty/security too, which this government elected to protect and safeguard
      Your fears are not without foundation!!!
      They are indeed well founded.
      Could you recommend some good economists to the HE to man the CBSL, without floundering like a drunken sailor, right now???
      Not 1 or 2 is totally insufficient.
      Half dozen required, even to man the Monetary Board as present lot clueless!!!
      Very urgent attention needed to stop the ‘Monkeying’!!!!!!!!!
      HELP!!!!

    • 5
      1

      Jambu

      “It looks like someone is shorting the currency. “

      Who?
      The West, Christian conspiracy, Hindia, Tamil Diaspora, Sambandan, Thamil Nadu, ….. or is it delusion of paranoid Sinhala/Buddhists?

  • 7
    21

    Like the Central Bank Bondscam, which was a bi-partisan UNP-SLFP (Jarapalanay), corruption racket with the “advice” of the IMF’s Christine Lagrand to her pet Singaporean Arjuna Mahendran to get Lanka into the Washington Consensus clutches, today the crisis is once again organized by US citizens Goat and Basil who work for the Deepstate. and Ranil of the UNP as cheerleader for IMF…

    As Victoria Nurland visits Lanka the crisis is being escalated and staged like the CIA funded ISIS attacks on Easter 2019, to get Lanka to agree to US demands.
    But Sri Lanka should follow India and buy discount oil and Gas and fuel from Russia, tell the US to shove its sanctions and ask Asian Giants India and China to bail it out rather than get into the IMF noose…

    • 9
      1

      Hi Dinuk,
      China, India are not bottomless wells to draw indefinitely!!
      Russia has trade/economic embargo.
      One has to bear the consequences, if breached.
      Already GSP is hanging on the wire and no more antagonising Europe is good or going to help SL.
      Remember l GSP was lost 2014, last R Bros. Inc., regime, most Brands shifted to Bangladesh (BD).
      That’s why BD was able to give SL swap of US$ 500 million in 2021 and we Sri Lankans are begging from the whole world for daily survival!!!
      We SL’s are looked upon as a basket case, from what we started off 70+ years ago, all on our own steam with an infrequent ‘hiccup’, until the infamous R Bros. Inc., arrived on the scene in 2006!!!
      Now we live hand to mouth, that shipments arrive in the outer harbour of Colombo port and await payment for stock before entering the port proper for cargo discharge!!!!
      Sri Lankans must be thankful the shippers for this kind heartedness of the suppliers as this is not normal practice!!
      We had similar situations in 1970-77 during another regime, which was the “start-up” Genie of the SLPP.
      Same product with a different face!!!
      Same result!!

      • 3
        6

        The American Octopus (Doc. Oct. the Cyborg of Spider man fame), Sri Lanka is being strangled by the US Deepstate and its EU NATO proxies using the AUKUS DIASPORA to turn Lanka into an Euro-American Colony.

        Every year at this time March-April the US war machine unleashes an attack in Sri Lanka – 2019 it was CIA owned Saudi funded Ester Sunday attacks, and then in 2020, 2021 it was Covid Lockdowns all aimed to destroy and debt trap the Sri Lankan economy with the US citizens Goat and Basil. After the 2019 attacks Pompeo was due in Lanka to sign SOFA and MCC. Now Nuland is coming to make sure that Lanka is COLONIZED by the IMF and Washington Consensus.
        Sri Lanka must start buying Russian oil, gas and jet fuel and look East and dump the US_EU war Environmentally destructive machine.

        • 3
          5

          Sri Lanka must like India act at in the self-interest of its people and buy oil, gas, jet fuel from Russia NOT follow Euro-American dictats and Sanctions regimes and succumb to EU GSP removal threats.
          GSP and GSP Plus, FAKE Trade and AId concession have kept Sri Lanka Business community, policy makers and politicians colonized and in the Paris Club and Washington consensus debt trap – following IMF and WB dictats rather than craft independent development policies.
          GSP is a trap and instrument and exemplar of how IMF and WB Colonial Development policy works in dependent developing countries.This is what Victoria Nurland is coming to enforce in Sri Lanka – the US sanctions regime. and Washington Consensus Debt trap…

      • 4
        0

        Mahila

        “We had similar situations in 1970-77 during another regime, which was the “start-up” Genie of the SLPP.”

        Please stop offending SJ who believes it was the only golden era of the people of this island, because it was Siri Mao who manage the country during the period you just mentioned.

        • 2
          0

          NV,
          “It was the only golden era of the people of this island, because it was Siri Mao who manage the country during the period you just mentioned.”
          How could I disagree with the sentiments of a socialist of such standing!!
          However, I may mention one instance of this golden era.
          Back in 1970-77, basic ‘Karawala’, and Maldive fish (MF), (sun dried tuna) was in short supply, because Cooperative Wholesale Establishment (CWE) was the sole importer and distributor (to control possible corrupt practices by vendors!). Prominent person later in life – claiming lineage to the great king of southern SL, who duelled with King Elara and unified SL, long, long time ago – happened to be a “House Boy by night” at ‘Tintagal’ – so he claimed “that he knows Chandrika’s ways” – and was also an employee of CWE at Union place, was the one who could do the magic of providing hard to find MF for the Pol Sambole and Bread or Rice meal!!!
          I am not suggesting he was a source of supply to his night job employer at all, which is preposterous!
          At a price though, otherwise forego, as it was hard to find in any retail outlet!!!
          (Contd.)

        • 2
          0

          (Part II)
          The corruption, they envisaged to avoid was manifest unabashed in the ‘BRAIN’, itself of the system! Golden Era! They could not see it because it was not in the “Focal area of corrupt practice”
          The service included, to deliver to your car, if it is left open in any of the premises in close proximity to CWE Union Place.
          There were many who benefited and my good fortune is of ‘having been one of them’!!!
          No doubt GOLDEN ERA and thanks to Siri Mao, FRDB and NMP for some part, Pol Sambole with MF!!
          On the other side of the coin, Mr Ian Wickramanayake, the ‘chosen one’ as Bribery Commissioner was taking in Peons at various places for bribes of as little as SL Rs. 5 for “moving files to the Top of the pile for Urgent attention of the Subject Clerk”

      • 6
        0

        “Russia has trade/economic embargo.”
        Is Quad partner India taking it seriously?
        The suggestion is not to borrow indefinitely from India or China.
        Part of the mess is self-imposed, but another part is the result of global factors.
        There was gross mismanagement in matters like fertilizer, shady deals with an American energy company, unpreparedness for the coming financial crunch etc.
        Borrowing to tide the crisis will not need bottomless resources, if policy errors are corrected. (I am not very hopeful of the government’s learning from mistakes.)
        Avoiding IMF has sound reasons. But there is temptation err on that front.
        Where has the IMF helped economic recovery in the Third World? It only burdened the poor to pay debts.
        Will IMF advice against our criminal consumerism? Certainly not, for that hurts global big business.
        *
        1970-77 had two serious problems that are willingly avoided mention.
        Two years of drought affected food production at home and abroad. (Even import of grain was a challenge. There was the “food drive” which some mischief makers tried to sabotage)
        Crude oil prices shot up seven fold causing serous BoP crisis.
        What did we have by changing regime?
        A Dharmishta Government!
        The country became a borrower nation that destroyed its production base by exporting labour. we are victims of consumerism– something that has not changed since 1978, despite 30 years of war.

        • 2
          0

          SJ,
          Good morning,
          “We are victims of consumerism– something that has not changed since 1978, despite 30 years of war”
          I fully agree with you. No doubt that has to change in future.
          On the crisis at hand and last 2 years of inaction or lack of reversal of ‘ill-advised Tax relief policy’, crunch on Rupee revenue and the dollar exchange drama.
          Their inaction, some claim is to diminish the rupee payment for incoming Dollars to mitigate the loss of rupee revenue and enhance the dollar gain for people converting ‘ill-gotten lucre’. How far that is true is a moot point, nevertheless gaining momentum!!!
          What Governor CBSL, Finance Minister (PM from 2020 – July 2021), Finance Ministry Secretary and the 20A empowered, President to mitigate it??
          Admit, take responsibility and be accountable.
          Simply unable ‘READ’ ominous signs, comprehend what was upcoming for 2+ Years.
          Nothing related to Pandemic, which is an EXCUSE!
          Weren’t INEPT and “square Pegs in Round holes”??? Misuse of Power!
          If they are honourable men, they would wish us to believe, is it too much to ask them to return to Treasury emoluments/pensions for the past 2 years at least in mitigation thereof?! SMALL PRICE!

          • 2
            0

            Mahila

            Thanks for sharing political tidbits.

            Now the issue is Gota seems to be distancing himself (and his clan) from the mess that we are in.

            He needs scapegoats.
            Can he now blame international conspiracy, Hindian threat, Tamils Diaspora, the unpatriotic Liberals, Tamil Nadu, British Colonial rule, Dutch, Portuguese, Pandyas, Cholas, ….. TNA, GG Ponna, Chelva, …..

            Gunawansa the saffron thug points out Hindians are buying island’s assets left, right and center, rightly so. However, he sounds like as if he is not aware of a large part of this island land is already owned by China, and its interference. Do you know why?

            By the way “SIRI MAO and her merry men could do no wrong. Even after 55 years, a few men are still infatuated (though extended) like teenagers, with SIRI MAO, who will go to any extent to defend what she did or didn’t do. We should understand that we cannot erase teenage memories, and expect them to overcome their nostalgia for SIRI MAO’s ERA.

            Self sufficiency in every goods and services is a myth.
            Trade is as important as production, in this increasingly globalised world, supply chain depended. Import substitution never worked and never will. Globalisation did not start yesterday and won’t end tomorrow.

            Please read:
            How to Judge Globalism BY AMARTYA SEN
            https://prospect.org/features/judge-globalism/

            • 0
              0

              NV,
              “Self-sufficiency in every goods and services is a myth”
              Absolute Truth.
              There are constraints to achieve unlimited ‘Import substitution’ – Practical issues.
              First and foremost the Economic scale of production and weather, climatic and topography.
              Example for instance – Automobile manufacture – SL Market is very small to be economically profitable, scale of production and marketing to justify Return on Investment (RoI).
              Indian market is different and successful. They have vibrant Automobile industry from design to marketing with advanced technology incorporated regularly though not annually as the American or European counterparts.
              Agriculture, same story, climatic conditions vary from country to country and for each product. It may be possible in “glass house” conditions, expensive! Limited economic viability.
              Land too is becoming scarce with population explosion and needs balance needs to be exercised.

              • 1
                0

                Native, Mahila,
                ““Self-sufficiency in every goods and services is a myth”
                I can understand young people who were born in the 80’s believing in the theory that everything we need can be produced here. I am reminded of the old chestnut that the “baases” in Panchikawatta could produce any car parts. Partly true, they could handle 30 year old Morris Minors, but where are these guys when hybrid batteries or engine computers die ? The world has moved on.

  • 6
    1

    Collapse Of The Rupee: Is It Sudden Or Orchestrated

    Foreign bodies can creep due to acute foreign exchange crisis and make agreement the against party in Sri lanka will be silenced due to the ongoing problem and in name of aid or effective solution like poverty and economic solution step to create agreements will be done and open doors for international relations: trade, territorial boundaries, human rights, law enforcement, environmental matters, and many others. The concerned countries will achieve the target that previous Sri lanka dis agreed. Possible this collapse to the country is purposely done.

    • 6
      0

      RBH
      There were serious flaws.
      Could not the Finance Ministry foresee the crunch coming?
      Two years of stagnation caused by COVID-19 shutdowns is a factor. But what was done to avoid the crunch?
      The fertilizer policy was a disaster, compounded by mischief in testing the organic fertilizer and causing a loss to the government which had to pay compensation and the purchase of bogus organic fertilizer from India (India did not mislead though) leading to crop failure.
      Our difficulty is that we see everything in pure black and white.

  • 6
    1

    Foreign bodies can creep due to acute foreign exchange crisis and make agreement the against party in Sri lanka will be silenced due to the on going problem and in name of aid agreements will be done and open doors for international relations: trade, territorial boundaries, human rights, law enforcement, environmental matters, and many others.

  • 10
    2

    At the beginning Paskaralingam & Arjun Mahendran and followed by Mahinda Rajapaksa’s cronic economic policy and his children’s luxury life, all contributed to the downfall of country’s economy. Moreover, Mahinda Rajapaksa blindly accepted China’s predatory loan and finally Maithripala Srisena’s corruption on leaning towards China. Now Gotabaya Rajapaksa relied on his military officers instead of relying on people with knowledge on economics. Then excess number of Ministers, State Ministers, etc. Are these wanted.

    • 6
      0

      AR: Who brought both Paskaralingam and Arjuna Mahendran into “Yahapalanaya”. None other than the “Master Crook” the then PM Ranil Wickramasinghe.

      Aarjun Mahandran in evidence at the Presidential Commission into “Bond Scam” said: “I acted as per the instructions of the PM -Ranil W”. So who was the “Master Crook” in the “Bond Scam”?

      Who is Paskaralingam? He was appointed a “Consultant & Advisor” to the Finance Ministry by the same PM – Ranil W. Do you know Paski was “Imported” from UK by Ranil W? Now “Paski’s” name appears in “Pandora Papers” along with Thiru Nadesan & Nirupama Rajapakse. What does it tell you? “Malli Un Okama Yaluwo” – “Brother, They Are All Friends” – a very TRUE statement by Ranjan Ramanayake.

      • 3
        0

        Hi Simon,
        “Who is Paskeralingam? He was appointed a “Consultant & Advisor” to the Finance Ministry by the same PM”
        Your information is correct.
        However, what is missing is that he (Paskeralingam) was a CCS (Last intake)/SLAS officer, Senior Assistant Secretary, Ministry of Education, (1965 – 1977) Secretary, Ministry of Local Government, Housing and Construction (1977 – 1988) Secretary to Treasury, (1988 – 1994) under Premadasa regime and rejuvenated the stock market and Foreign investment after the destruction caused by 2nd JVP insurrection including the booming 100+ garment industry.
        The best economic rejuvenation SL has seen since independence!! Retired in 1993.
        He was also economic advisor to cabinet, during 2002 – 2004 and helped to resuscitate the economy after the mismanagement 1994 to 2002.
        That is why RW got him down from UK, where he was in retirement.
        I would not say the same with AM.
        What I am saying is that every single person should not be painted with the same brush

        • 2
          0

          Mahila: Thanks for your input on Paski. I would add two more assignments he held and “DID” during Ranasingha’s tenure. (1) Paski was appointed to the Board of Directors of Air Lanka in addition to him being the Secretary to Finance Ministry. (2) It was “Paski” who issued a cheque for Rs. 200 million, under his signature to LTTE during the tenure of President Ranasinghe Premadasa.

          Please also note, all the “MISERY” that Sri Lanka suffers today was brought about by all these “VIYATHU” (Learned) who excelled in high with “Educational” and claimed an “Excellence” in the “Public Service” of the “Beaurocracy”. “Paski’s” name is among very many of those. In addition, isn’t it “Significant” to see his name appearing in “Pandora Papers”? It was after his arrival in Sri Lanka, that Ranil W “Donated” Rs. 01 Million to bail out the cash trapped UNP. From where did the money come from? Food for thinking.

          • 2
            0

            Simon you are right, and I’m replying to Mahila too. I have no arguments about his knowledge, sharp wit and experience. He is a clever guy. However, while he did work hard, he ROBBED as well. He was the guy who was alleged to have taken a LKR400m worth bribes from Boeing in purchasing air crafts for Air Lanka during the last stages of Premadasa/ early Wijetunga regimes. There were so many other stories too, illustriously published in the Sinhala ‘Ravaya’ newspaper by Victor Ivon in early 90s. paski was one good reason why Chandrika came to power in 1994!!
            All in all, Paski is a fine example of a clever Sri Lankan intellectual, BUT robbed public wealth left, right and centre. That is the very reason why Sri Lanka is in such a bankrupted state today – EDUCATED PEOPLE ROBBING AND SUPPORT POLITICIANS TO ROB!!

            • 1
              0

              Jit: Thanks. “his knowledge”, “sharp wit” and “experience”. “He is a clever guy”. What do you mean.? With all those qualities, in my opinion, must be in all senses an “Above Par Excellence” and more importantly “HONORABLE”. Those who ROB like this are the most “DISHONORABLE” and “CROOKS” who must be made to rot in jail. The question is WHO will Bell the Cat?

              Did you see what happened to the case (Malvana property) against Basil? The AG terminated the case without calling any “Prosecution Witnesses”. The AG said: “The main witness has not made a complaint to the CID and therefore the case cannot proceed”. Didn’t AG know this before filing the case? That is the “Professionalism” of “Educated”, “Sharp” and “Experience” men in S/L.

              • 2
                0

                Simon, Paski is a smart guy, very intelligent, with a sharp wit, no matter what! That we have to admit. Those are the traits he used to cajole Premadasa and others like Ranil. We nee to admit he outsmarted RP and RW. You also need to understand that I did not APPROVE the things he did. Those are two different things. Sun Tzu had stressed enough to never underestimate the power and cleverness of the enemy. Dont just do that – you will regret later!

  • 10
    0

    Dr. Wijewardane: “Collapse of the Rupee” without a doubt an “Orchestrated Ploy” by the pivotal organization of the country that “Directs” the economy and the monetary policy – the Central Bank.

    What more than an “Orchestration” one can expect from a “CROOK POLITICIAN” like Ajith Nivad Cabraal being made the Governor together with another “Band” of “Political Henchmen” appointed to the all-important Governing body named “Monetary Board”?

    However, from an academic point of view, it is good to “Audit” the present economic situation and the role played by the Central Bank as you have very sincerely and eloquently done in this presentation. Thank you for feeding us with all that knowledge.

  • 12
    0

    These emergency loans from friends have either to be paid back in a few years or come with conditions that threaten national security. Both these outcomes would fall outside the disastrous term of the present regime, so that in the next round of ravaging by whoever comes to power next, can harp on the ” we didn’t do this, the previous govt did it” and play that same song ad infinitum until the country is finally laid to rest (ie failed basket case). If Russia and China can initiate a worldwide trend to upstage the artificially propped up USD as the world’s reserve currency, it should help. However, the main solutions lie in returning all the looted billions from safe overseas havens, massively increasing value added export production and some austerity measures, while eliminating grand corruption and their roots.

  • 2
    4

    The learned author reveals details about the exchange rates and the saga involving its forceful control, the release and its impact. As a layman, who knows next to nothing in these matters, may I pose the issue as to whether the relevant authority prepared to liberally release dollars even if the rate is 500 LKR per 1 USD, way beyond the so called market rate. My little knowledge tells me that the rate is without significant fluctuations if the Dollars demanded at that rate can be supplied the relevant parties. Has anybody estimated or guesstimated what that rate would be?

  • 4
    0

    Whether it is incompetence, ignorance, pig headedness or just plain corruption, the CB Governor is directly responsible for the current economic situation. Despite his bad past track record, he was re-appointed by the current regime & we all know the result of his ‘prudent’ management of state coffers. Knowingly, or unknowingly (in which case he has proved his incompetence & ignorance), he created a thriving black market, so do we need more to judge Cabral’s unsuitability to run the country’s economy?

    Would a CEO of a mercantile establishment keep his Finance Manager if losses are incurred due to bad management decisions? In fact, a FM with a bad track record would never have been employed in the first place. Does the poor tax payer has to continue paying this yob’s salary, perks & pension? I would like to see him behind bars for mismanaging the country’s economy, which is nothing short of treason.

    • 3
      0

      Raj,
      Good morning.
      You cannot just “displace someone from his position”, when he was appointed with the blessings and gratitude for ‘Past Services rendered’, by the ‘Messiah’ of Nawa Sri Lanka!!
      Ex-PM Ranil accused of appointing his friend AM as governor and held in redicule for the Bond Scam.
      Will any one at all say Mea Culpa??!!
      Your guess is as good as mine!!
      I may concede your guess is the Best!!
      No one is responsible in this government whatever happens!!!
      That’s the ultimate story!!!
      Only responsibility they take is, “They were the people who did it”, including winning the ‘WAR’, 13years ago!!!
      People believe it, because when he returned to SL after overseas sojourn, declaration of defeat of the LTTE, he KISSED THE TARMAC at KIA, on disembarkation!!
      Ask them how they did it??? The answer would be ‘ALL REVEALING’!!!
      That’s the state of affairs of this resplendent Isle!!
      Managed to total destruction.

      • 4
        0

        Mahila

        The Economic Council is made up of

        President Rajapaksa, will comprise the following:
        Prime Minister Mahinda Rajapaksa
        Minister of Finance Basil Rajapaksa
        Central Bank Governor Ajith Nivard Cabraal
        Minister of Trade Bandula Gunawardhana
        Minister of Highways Johnston Fernando
        Minister of Agriculture Mahindananda Aluthgamage
        Minister of Plantation Ramesh Pathirana
        Secretary to the President Gamini Senerath
        Secretary to the Treasury S R Aatigala
        Deputy Governor of the Central Bank of Sri Lanka Dhammika Nanayakkare

        Most of the cabinet and state functionaries DECORATE this council. Would you consider this a virtuous council?
        I was told VP had already gone mad before the end of the war.
        That should be a lesson for Gota and his gang(sters) to bear in mind.

        • 2
          0

          NV,
          The economic council (EC):
          President Rajapaksa NAPE
          Prime Minister Mahinda Rajapaksa NAPE
          Minister of Finance Basil Rajapaksa NAPE
          Central Bank Governor Ajith Nivard Cabraal NAPE
          Minister of Trade Bandula Gunawardhana ToE
          Minister of Highways Johnston Fernando NAPE
          Minister of Agriculture Mahindananda Aluthgamage NAPE
          Minister of Plantation Ramesh Pathirana NAPE
          Secretary to the President Gamini Senerath NAPE
          Secretary to the Treasury S R Aatigala PE
          Deputy Governor of the CBSL Dhammika Nanayakkare PE
          7 of the 11 members are cabinet ministers who are “Not A professional Economist” (NAPE) and only 2 are Professional practicing Economist (PE) of any credence.
          Most would be at a loss to understand, GDP, growth rate and per capita income!!!
          5th minister is devoid of practical economic experience!!! He could impart economic knowledge to students at best and how to manage family of 5 on Rs 2500 per month!!!!
          What an EYEWASH?
          They could simply have ‘Cabinet meeting’ and invite the 2 Economist and Accountant to attend to discuss economics!!!
          If that is the only external contribution required by the government?!
          Do away the EC as the “Cabinet seems to have the talent”!!!!
          Save cost and money!!
          If not, Why not??

        • 2
          0

          NV,
          “VP had already gone mad before the end of the war”
          There is an old saying that, God drives those whom he wants to destroy, raving crazy and mad!!
          Probably, that’s what happened to VP and may be it may happen to many more??
          History is replete with such instances!!

          • 2
            0

            Mahila

            I agree.
            However nimal fonseka is among the protesters looking for a particular person.

            • 1
              0

              Mahila

              Sorry.
              My comment should read as follows:
              Nimal Fernando and Sarath Fonseka are among the protesters in deep, deep, deep under cover looking for a particular person.

  • 8
    6

    This man is trying to show Sri Lank that he has the final solution for Sri Lanka’s do;;ar and other economic and financial problems.

    But he is only a hack ex-Central Bank employee, part of the people responsible for creating this mess in the first place, with their capitalist boot licking policies in the past.
    he is still offering solutions based on the same stupid framework as floating the rupee and going to the IMF! Which country in the world has achieved economic salvation by following IMF advice, Wijewardana?

    You have no solutions to this problem. Only by deploying the national youth for production of essential goods and services can help us get out of this negging problem, We will not develop until our young men and women keep making beds for tourists, and keep stitching clothes for rich Europeans.

    So keep your unimaginative solutions to yourself, and Horizon running with blood money hidden overseas by plunderers.

  • 6
    0

    Simply, #cabraalgohome – you ruined the economy as you have been in the Central Bank and the Finance Ministry since 2006. You have opposed approaching IMF, so at this stage keep off IMF negotiations without sabotaging the process.

  • 2
    0

    It is said the people get the government they deserve. This is very true about Sri Lanka. Since independence, the country has been ruled by mediocre and illiterates. They played the communal and religious card to secure power and stay in power. Sinhalese – Buddhist voters were fed on a steady diet of Sinhala Only and Buddhist Only slogans.

    We have a bloated parliament and a bloated civil service. Sri Lanka with a population of 22 million has a parliament consisting of 225 elected members. A cabinet of 27 Ministers, including 6 from the Mahinda Rajapaksa family. Also, there are 38 state ministers. Just imagine the astronomical cost of maintaining them.

    Across the Palk Strait, Tamil Nadu with a population of 76.4 million has a state legislative council consisting of 234 members. The cabinet has only 24 Cabinet Ministers, 9 Ministers of State (Independent Charge) and 30 Ministers of State.

  • 3
    0

    It costs a fortune to maintain the army of MPs, cabinet ministers and State Ministers. State employees in Sri Lanka total 1,149,867 (2017) and in Tamil Nadu, the number is around 2 million.
    As for corruption, Basil Rajapaksa got a mansion built in Malwana costing Rs 240 million by engaging Architect Muditha Upali Jayakody. When investigations commenced Basil disowned property in the extent of 16 acres, 1 rood, and 8 perches.

    Gotabhaya Rajapaksa still owes a sum of Rs.47.9 mn to Sri Lanka Land Reclamation and Development Corporation (SLRDC) for the construction of the ‘D A Rajapaksa Mausoleum and Museum at Medamulana.
    Both Mahinda Rajapaksa and Gotabaya Rajapaksa gifted a golden statue of Buddha to the Sandahiru Maha Saya in the presence of Maha Sanga in Anuradhapura. The statue was made out of 8 kilos of gold confiscated by the Customs and handed over to the Rajapaksas.

    While the Rajapaksas have got away with the massive and shameful “theft” poor Director General of Sri Lanka Customs Jagath P. Wijeweera and former Customs Additional Director General Tharaka Seneviratne were arrested by the FCID and charged in courts by the previous government.

    Sad tears of suffering citizens may dethrone and destroy the entire government. Autocrats and dictators like Hitler, Mussolini and Czar are examples.

    Now nemesis has caught up with the Rajapaksa dynasty sooner than anyone thought. 2/2

  • 1
    2

    Without Bread, Native Veddha must be eating Cake now. LOL!!

    • 2
      1

      Reginald Shameless Pererass

      “Without Bread, Native Veddha must be eating Cake now. LOL!!”

      My people can survive on home grown manjoka (Cassava) unlike lazy bums like you.

  • 1
    1

    “My people can survive on home grown manjoka (Cassava) unlike lazy bums like you.”.

    So what are you complaining for then? No petrol, no dollars blah blah blah. Do you need Petrol and USD to enrich the soil before planting Manjokka?

    Btw, how can you survive on Manjokka for all 3 meals? Have you tried it for even 3 days?

    Get lost YBF.

  • 1
    0

    The title of this article has the answer!
    SL is ruled by freemasons.
    Contrary to what many Lankans are saying, the countrys economic collapse is not due to the Rajapaksas lacking university degrees in their resumes, but because they are taking orders from their higher ups, like the Rothschilds in the UK, and being told to do this!
    The same applied to previous leaders who have degrees. They are given the freemasonic script and follow it.
    That whole talk about ‘qualifications’ is nothing but a distraction.
    Look up Mark Alan King and his gematria website for the truth!

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