30 November, 2021


The Fate Of The Rupee: The Central Bank Is Caught With ‘Devil’s Alternative’

By W A Wijewardena

Dr. W.A Wijewardena

Not all are losing when the rupee depreciates

The recent depreciation of the rupee against the US dollar in the market has apparently driven the entire nation to a panic mode. While it had been a field day for the media and opposition law makers, the public, made up of both gainers and losers when the rupee depreciates, have temporarily forgotten the gains and chosen to be driven by the sentiments of losing. For instance, those in the export of goods and services and those who send remittances back to Sri Lanka stand to gain when they get more rupees for every dollar they earn or remit. But those who consume imported products and those who plan to avail themselves of foreign services like travel abroad, education or healthcare services will lose since they have to now spend more rupees to buy dollars. 

The government is a net beneficiary of depreciation

The government on the other hand, as I have pointed out in my previous article titled ‘Rupee’s sad destiny of one way journey to depreciation’, is a net gainer in this depreciation game. That is because though it has to find more rupees to finance the current year’s external debt servicing, it earns more rupees by way of higher import duties when imports are valued at a depreciated currency and when it borrows in foreign exchange and sells those dollars to the Central Bank. For instance, in 2018, if the exchange rate depreciates by one rupee per dollar, the government is to earn an additional amount of Rs 4.5 billion, more than double the increase of Rs 1.7 billion by way of servicing the external debt. Of course, this is not a valid reason for a government to allow its currency to depreciate in the market. That should happen, as is the case of Sri Lanka at present, when the fundamentals in the foreign sector are at odd, namely, when the country fails to earn enough foreign exchange to meet foreign exchange payments year after year. To address that issue, economic policy makers in the government should have a different set of policies. 

Panic causes to choose the worse data

The reference exchange which panic-makers have used had been the average selling rate of dollars by banks when they do transactions among themselves in what is known as the interbank spot foreign exchange market. The rate published by the Central Bank in this connection had been the actual average transaction rate pertaining to the previous day’s business. However, commercial banks quote in this market not only a selling rate but also a buying rate which is about 4 rupees lower than the selling rate. The Central Bank which compiles the data publishes both the buying and selling rates and also an indicative rate which is the mid rate between them. For all purposes, the Bank and other agencies like the Customs use this indicative rate. According to Central Bank data, as on 21 September, 2018, commercial banks had offered to buy dollars for Rs 166.78 per dollar and sell them for Rs 170.66. Accordingly, the underlying indicative rate had been Rs 168.03 per dollar. However, since the selling rate had been higher, the movement in that rate had been used to drive panic into the heads of the public.

Devaluing the rupee through the FEEC system 

Since independence till 1968, Sri Lanka had a single fixed exchange rate at Rs 4.76 per US dollar. As the country did not have sufficient foreign exchange balances to maintain this fixed exchange rate, the rupee was under constant pressure for downward rate adjustment which was called ‘devaluation’ in that fixed exchange rate system. By 1966 when the problem became chronic as well as acute, Sri Lanka decided to go for a dual exchange rate system instead of fully devaluing the rupee. In this dual exchange rate system, the essential imports were at the official exchange rate. All others were at a premium of 65% above the official rate under a system called Foreign Exchange Entitlement Certificate or FEEC system. It was equivalent to levying of a tax of 65% on users of foreign exchange. Since a greater part of imports were at the FEEC system, it was a lucrative revenue source for the government. As such Dr N M Perera who as an opposition member had accused the government of being a black market foreign exchange seller under the FEEC system did not see the necessity for its abolition after he became the Minister of Finance in 1970. This practice of partial devaluation was continued till 1977 when it was abolished under the new flexible exchange rate system introduced by the government. Under this system, the rate was unified at Rs 15.56 per dollar representing an effective devaluation of 7 % over the FEEC rate. Under the flexible exchange rate system, the value of the rupee against the dollar was allowed to be determined in the market. Accordingly, any decline in the value was called ‘depreciation’ as against ‘devaluation’ in the previous fixed exchange rate system. Similarly, any increase in the value was termed ‘appreciation’ as against ‘revaluation’ in the fixed exchange rate system. 

Blame-excuse game played by politicians

Since then what Sri Lanka has experienced has been a continuous decline in the value of the rupee. It had been the practice of politicians in the opposition to charge the government in power for failing to maintain the value of the rupee. Those in power had been defending their position blaming outside forces for the sad fate of the currency. However, since no action is being taken to remove the fundamental causes for the depreciation of the rupee, it continues its sad one way journey to depreciation. As such, when the political power changes hand, the blame-excuse game is now played by the very same politicians who now play the opposing roles. 

Figure 1 shows the decline in the value of the rupee against the US dollar from 1995 to mid September 2018. As the graph demonstrates, it is a continuous depreciation with some bumps in certain periods. It is therefore important to indentify the causes for the rupee to depreciate in the market continuously in this manner. 

Avoiding a deficit in the current account

If a country is interested in stabilising the value of its currency, there is only one recipe for it. That is, it has to earn sufficient amount of foreign currencies to meet the demand for foreign currencies from its own citizens. 

Foreign currencies are earned by countries by selling goods, known as exports, selling services and selling factor services to foreigners. These are being topped-up by a non-selling foreign exchange flow, called inward transfers, which a country gets by way of gifts. In banking parlance, they are known as remittances by Sri Lankan workers abroad. 

On the other side, Sri Lankans demand for foreign currencies to import goods, buy services from outside and pay for factor services like paying interest on loans and profits for investments. To these payments are added the gifts which Sri Lankans extend to foreigners, known as outward transfers. 

These transactions could be amalgamated into an account called the current account of the balance of payments by recording the first category on the credit side and the latter on the debit side. The essential requirement for a currency to be stable is that this current account should be balanced or if it has deficits, those deficits should be offset by similar surpluses in other years. If there are continuous surpluses, the country earns more foreign currency than it needs. 

Unless those surpluses are lent to other countries, the country may experience a continuous appreciation of its currency. If there are continuous deficits, it has a shortage of foreign currencies. These shortages have to be filled by borrowing from other countries and it would help the country to temporarily stabilise its currency. But it would add to its foreign debt driving it to a malady known as debt trap. It makes the matters worse and the country is, therefore, destined to experience a one-way journey toward depreciation of its currency. 

Sri Lanka’s dismal track record in the current account

This latter situation is the one which Sri Lanka has experienced during the entirety of the period since 1977. Its current account has been in deficit and, when measured as a percent of the size of the economy or GDP. That deficit, though low at about 2% of GDP today, has been as high as 16% in early 1980s. 

When the current account deficit goes up, the country is in the habit of pressing the panic –button talking about the necessity for introducing the needed external sector reforms. But on the other side, when it goes down even by a small magnitude, it falls into a state of complacency, ignoring the risk and danger it is facing. 

During the period from 2012 to 2017, the current account deficit has been on average at 3% of GDP a year. Therefore, there has been pressure for Sri Lanka rupee to depreciate. What the previous administration did was to borrow abroad and use the proceeds to release the pressure in the market. It is like giving some pain killer to a cancer patient to relieve of his pain. It is not a cure. Hence, the wound begins to fester within the body without proper medication. One day when the cancer becomes acute and it is too late to administer any medication, the patient would succumb to his illness.

The inactivity of the new government 

This was known at the time when the new government took power in January 2015. But the Central Bank’s Monetary Board as well as the Minister of Finance behaved as if there was no economic crisis. 

The Central Bank Annual Report for 2014, released in April 2015 under the stewardship of the new government, talked complacently about the stability of the rupee during 2014. That was against the US dollar. It had been more complacent when it had reported that the rupee has appreciated on average against the currencies of its major trading partners during 2014.

Nominal and real effective exchange rates

 To assess this average change in the value of rupee against its trading partner currencies, the Central Bank calculates two effective exchange rate indices, one for rupee’s nominal value and the other for its real value. The fact that both these indices have appreciated in 2014 means that Sri Lanka has lost its competitiveness against exports and gained a preferential advantage for its imports. This is an ailment because it suppresses exports and encourages imports, the main cause for the rupee to come under pressure for depreciation in the long run. 

Financing the foreign exchange shortage by continued borrowing

Figure 2 shows the movement of the real effective exchange rate (REER) of Sri Lanka as against the movement of the nominal effective exchange rate (NEER) during 2010 to July 2018. It is seen that till January 2012, both indices have moved comfortably side by side to each other. However, since then, REER had been continuously appreciating while NEER had remained below 100 throughout. An appreciated REER will erode the competitiveness of Sri Lanka’s exports thereby acting as a tax on the export earnings and a subsidy on imports. Both have caused the widening of the country’s trade deficit from US $ 9.4 billion in 2012 to an estimated deficit of US $ 11 billion in 2018. Since the remittances which are the main financing source of the trade deficit have been stagnating at around US $ 7 billion, it has resulted in a current account deficit of around US $ 3 billion that has to be financed by borrowing from abroad. This is the tactic used by Sri Lanka throughout the period and it has increased its foreign indebtedness beyond its ability to service. For instance in the next 12 month period, the repayment of debt and payment of interest on such debt will be about US $ 6.2 billion; as against these commitments, the free foreign reserves available have been only US $ 7.7 billion. If Sri Lanka is to use its foreign reserves to defend the rupee, it has a space of only US $ 1.5 billion. This has reduced the Central Bank to making a critical choice: what would happen to the Sri Lanka rupee after it has spent the freely available reserve of US $ 1.5 billion?

Thai fiasco should be a learning point for Sri Lanka

Countries which have gone for this choice have ended up with extremely bitter results. For instance, as I have documented in my book titled Central Banking: Challenges and Prospects (p 191) just prior to the Asian Financial Crisis of 1997, the Bank of Thailand in a vain attempt at defending the Thai Baht at 25 Baht to a dollar had spent about US $ 25 billion out its reserves. When the reserves were all exhausted, the Bank had to allow the Baht to go for a free fall causing it to decline to a level of 50 Baht to a dollar. The Governor of the Bank, Rerngchai Marakanond was later charged by the government for losing the nation’s precious foreign exchange balances. On being found guilty, he was imposed the biggest fine in Thai history amounting to Baht 186 billion which was equivalent to US $ 4.6 billion. Hence, it is a risk for a central bank to lose the nation’s foreign reserves to vainly defend the currency when the market forces are all exerting pressure for it to depreciate.

When the market pressure is high, no amount of foreign currency sale will not help Sri Lanka 

This is a choice involving Devil’s Alternative, as described by the British novelist Frederick Forsyth in his novel under the same title. When someone is faced with the Devil’s Alternative, whatever he does leads to enormous costs. This was amply described by Governor Indrajit Coomaraswamy when he addressed a recent summit in Colombo. Drawing on two failed examples from Sri Lanka’s recent past, he is reported to have revealed that during 2011/12, the then administration of the Central Bank had spent US $ 4.2 billion out of its reserves in a desperate bid to defend the rupee. Yet, it could not prevent the depreciation of the rupee by 13.5%. Similarly, in 2015, under the present government, the Bank had spent US $ 1.2 billion to protect the rupee only to experience a depreciation of the rupee by 9%.. Sri Lanka today is in the same critical situation. It could spend a massive amount from its reserves which have been built basically out of borrowed money to protect the rupee. But it would then have to default its foreign loan servicing commitments and still allow a free fall in the value of the rupee when it does not have any more foreign reserves to defend the currency. Either way, Sri Lanka is to suffer for failing to address the critical external sector issues in the past.

This is certainly a devil’s alternative for Sri Lanka.

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

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Latest comments

  • 6

    Our ladies who work in Middle East, Tamil ladies in tea plantations and ladies in garment industries bring bulk of the foreign exchange. Who use this hard earned foreign currency? Idiots in Diyawannawa use this money to import duty free cars. Politicians use to import luxury vehicles to their Ministries. Traders, mostly Muslims use this money to import all kinds of unnecessary junk. Do we need to waste hard earned foreign currency to import whitening cream for the rich ladies in Colombo who do not earn a single Dollar? Business guys with the support of monks organize all kinds of ‘Poojas’ at Ruwanweli Seya and import flowers from India. Politicians prefer to promote importing because they can collect commission.
    Ranil who has been preaching for free trade has suddenly taken a U Turn and asking to impose duty on imported goods to save foreign currency. Sri Lanka-Singapore Free Trade Agreement which was signed without getting proper approval is going to open free flow of goods to the country without duty.
    Ranil has outsourced his job as PM to Millennium Challenge Corporation, IMF and Malik. Only thing he does is go on blaming Rajapakse regime for creating a debt mountain which is not true. He use that to fool the people and sell Sri Lanka to foreigners.

    • 1

      Oh well! The show is off, soon we will be sold off Lock stock and barrel to Chinho. At least the Medamullana Modayas can speak Mandarin instead of Singhlish Neh?? to save us from the dragons mouth.

      • 3

        World Bank , IMF, Asian financial bodies have warned Srilanka for manipulating the SLRs.
        Now we see the results, as we are in the deep blue sea, will not be able to recover other than producing hundreds of begging bowls to go round the world begging for free funds.
        What happens next folks ?? When the bowls are full with charitable free money??
        Out comes the CHEQUE books from the Central bank to buy duty free cars, pay increase for every idiots of the government and its cronies.
        PM is good in passing the cheques to buy luxury cars for all his cohorts.
        I have warned before when the luxury free loaders ( cars) were given by the new YAMPAL to all the freeloaders when YAMPAL & co wrote cheques / wealth belonging to our people .
        Never utilised the state funds on DEVOLOPING the country . Still we see the freeloaders are up with their tricks scrounging the state wealth, all in the name of devolopements , where as only zero devolopements we see .
        ZERO DEVOLOPEMENTS in the North. Now the Aavas are out with the help of the armed services.
        Causing havoc and murder, by aiding and abetting by whom?? We know.
        All we see the doomsday soon for Srilankan law abiding citizens.
        Others have bogus passports or otherwise with one foot on the plane ,one foot on the ground to SCAVENGE THE STATE WEALTH.
        Srilanka the Paradise like no other?? Sounds familiar??

        • 2

          Forgotten to include with Bogus Passports holders with one foot on the plane, another in foreign prisons for people smuggling and the use of hands to scrounge the state wealth.
          Pick your choice.
          Now the Amude GAMARALA had gone to the UN to Gravitate with a new version of twists on innocent neck slitting brigade .
          Ah! What a country?

    • 2

      It is time for this government to bring all the money that Mahinda &Co pocketed during their period. If we can get the 18Billon dollar owned by Mahinda that is enough to resolve all the economic problems of this nation.

    • 3

      Eagle Eye,

      ” Traders, mostly Muslims use this money to import all kinds of unnecessary junk”

      Had these Muslims given equal share of state sector jobs, they would not have done this. But then, they would still be a burden on tax payers.

      Why do we depend only on ladies working in the Middle East and tea estates in the first place for foreign exchange? Because our people are dumbs who can’t produce quality products that other countries are interested in buying. How can that happen when most of our people are prepared to work from 8 to 5 jobs, and many are interested in working for Govt jobs for selfish reasons? Your strategy is to cut down on expenditure to meet both ends, instead of earning more?

    • 3

      Eagle Eye,

      On another note, do you agree that we chase away potential investors with our racism related violence that erupt time to time?

      How long are we going to survive on Middle East and maids?

  • 3

    As usual, the essay has explained the subject matter before arriving at the conclusion. But the question is this really a devil choice? Unless extremely important for self-defense, a murderer may not kill his victim. So not killing is many times not a devil choice. It is a valid choice to exit out of the problem. The governments who robbed the Industries like Air Lanka, Avant Grade, MiG and Central Bank, they did know this will be most probable outcome of their action. They certainly had better choice of not killing the victim. So, if they had not killed the victim, this would not be a devil choice. It is Aanduwas drove it into a situation looks like devil choice. But originally it was not.
    Rupee lost the value:
    1. Internal corruption and theft. (Central Bank, Air Lanka)
    2. Mismanagement of export Industries (Estates and Garments).
    3. Killing of Internal Industries. (Numerous, Kanthalai, Valachchenai, Paranthan, KKS. Sabugaskantha…….)
    4. Loss of work force. (1Million Refugees and 750,000 home aids)
    5. Political instability. Loss of Investors’ confidence. (Chitanta 18A, disastrous unity government)
    6. Excessive borrowing instead of seeking FDI.
    7. Lack of productivity (Goverment sector functioning below 30% efficiency, excessive cost for private sector by paying bribe at every government door and public Road)
    8. White elephants (another Confidence killing sources).
    9. Trade Law not matching International standard.
    10. Law and Order not maintained for Industries to make profit on the investments.
    11. Commercial bank loaded with factious assets and corruption.
    Problems are countrywide and built for ever, without any ending horizon, not limited to a sector or Geographical area.
    How can be this deep pit can bridged by temporary monetary filling? Any amount of silver and gold CB dump will go underneath the water.

    • 3

      The problem in this country is a fundamental distaste for hard work among males.. The easiest solution is to send your wife or daughter to slave in Dubai. Males prefer to idle wearing fancy uniforms , or buy a 3-wheeler and idle at junctions. If all these people did some actual work in factories, we would be able to export much more and the rupee would stay at a reasonable level. As it is, we have to import even construction workers in lakhs from India and China. These people have to be paid in foreign exchange, while the locals live off Samurdhi.
      When will we have a government that cuts subsidies to the bone, ban 3-wheelers outright, and demobilize at least 75% of those in the forces? The last category is the elephant in the room. They do no useful work, but are regarded as sacred in some quarters. Other countries fought bigger wars but de-mobbed the soldiers immediately at war’s end. In fact some British soldiers mutinied due to being kept on unreasonably.

      • 1

        old codger

        ” Males prefer to idle wearing fancy uniforms , or buy a 3-wheeler and idle at junctions. “

        It is their right to demand free rice from the moon, idle …………………. and when they see people who have made it by sheer hard work they go after them to either rob or destroy their businesses, properties, and livelihood under all sorts of flimsy pretexts while the uniformed watch and giggle and call themselves the vanguards, patriots, ………………………. smart ass patriots, ………………

        The government also should consider sending those idling patriots to middle east or Siberia working on road projects.

        Do you think chosen people should work?
        I think not.
        Instead they should be sent to Siberia or Medieval Middle East Kingdoms. Wimal Sangili Karuppan, Udhaya Gamanpilla, Dinesh, Champika, …………………. should be given priority, Dr Go .Nandasena, ……………. along with Gnanasara holding a whip behind them, …………… supervised by a robot controlled by artificial intelligence.

        Will robot impinge their human rights?

  • 3

    It is common knowledge that nearly Rs. 3 trillion had been spirited out of Sri Lanka in the 10 years from 2004 to 2013. Mr. WAW were you not in the Central Bank as Deputy Governor anytime during that period. Much of these monies have been routed through the CBSL.. What action did you take during that period to prevent such illegal money transfers. The Greek Bond scandal, The payments for lobbying to USA firms,and more than US$ 8 million spent on the idiotic attempt to sponsor Commonwealth Games of 2018..

  • 1

    Dr. Wije. thanks.
    Lanka and the rest of the world is in the grip of Euro-American Market Fundamentalism and what is needed is out of the box thinking; Also if liberalism is to survive it must be decoupled from Market fundamentalism as Robert Sidelski has argued in “Good politics, bad Economics” .
    Markets are rigged by external and internal players who have inside access to info. and/or what Stiglitz termed Information Asymmetries, and this is what is NOT discussed by IMF WB and MCC that writes Bondscam Ranil’s economic policy in Washington DC.

    Root cause of current crisis is Neoliberal economic development model of unfettered deregulation, financialization of every sector, and liberalization without sequencing and developing value adding in export sectors, or protecting vital local production is what turns countries into Development Disasters. Unfettered deregulation and market reform brings asset stripping and looting of the Wealth of Nations by corrupt local and foreign players. (EU and US have massive subsidies for agriculture sectors.)
    Greece, Argentina and Haiti are neoliberalism’s development disasters and where Lanka is. Haiti an island played by US Fake Aid and Fake experts is where Lanka is at headed at this time.

    The undermining of research institutions and education system by fake aid experts who peddle outdated growth models is a huge problem. LKI, IPS have been captured by obsolete neoliberal economics and the Neo con Advocata Insitute funded by MCC are examples of the undermining of national institution by Fake aid and experts.

    Out of the box thinking and Yuan or Renminibi Bonds in short term for crisis management MAY be the way to go. There is another Kinder model of development that China may help with. The Washington Consensus is dead but still in Lanka it continues to kill us, tho we all know IMF design policy to put countries in the “Bail Out Business” run by KPMG, Deloitt, Arther Anderson for further looting and asset stripping countries — as the Transnational Institute in Amsterdam calls it.

  • 2

    Look! For a long time, it is known that the rupee was overvalued. And, it still is. The actual estimate for the rupee versus the dollar is over 180 rupees. People don’t seem the understand that the Central bank has to spend a lot of resources to prop up the rupee. They simply cannot keep this up. In a proper free market, they have to float the rupee. If they do that, the rupee may hit 190 per dollar. To hedge against this inflation is not easy but one way people can somewhat mitigate this is by investing a small portion of their savings in precious metals like gold. This is not for immediate profit (though it may end up in a profit) but a hedge against inflation of the currency. People must learn to diversify their savings. It’ll be great if we can actually buy foreign currency like dollars directly without limitations.

  • 2

    MR has a solution. Bring me back to power.
    PS. When he took over Dollar was Rs.50 and handed over in 2015 at 130.Mind you he was the finance minister. As FM MR devalued the rupee by 3% announcing in one of his budget speeches which surprised the Governor Cabral.The only long term solution is to discourage imports and increase exports or as Malaysia did in 1997 during the Tiger economic crisis temporarily go for a fixed rate.

  • 1

    Upali lying does not change facts, just look at the graph above. In 2005 it was 100, and there was a war. You cannot devalue a floating currency so how did MR do that in a budget speech?

    • 1

      The fact is that the rupee has lost value at a steady rate since 1968.
      About 6% on average, MR/ war notwithstanding. Look at the graph again.

      • 0

        since you claim to be old I will spare this sentence. Depreciation and devaluation are two different things, Upali says MR devalued the rupee, MR could not do it even if he wanted.

  • 1

    We have a huge current account deficit.therefore two birds with one stone by increasing the duties on all imports the currency can be stabilised to.First of all every item that is imported regardless of what it is should have a minimum 10% duty on it.If that is still not enough and our current account balance deficit keeps on increasing we should raise the duty to 20% and if that is not enough to 30%.
    Then we should keep these duties at that level without increasing and decreasing all the time,until we get a current account surplus.Then we can bring the 30% to 20% and start the reversal process until we have neither a deficit or a surplus.Why i say that there should be some method in this madness of setting duties is that industrialists should be able to have confidence that there is no quick reversals so that they can invest in local industries for import substitution.

  • 0

    US plays with weak countries ..
    Still our politicians do not know that …..
    Appoint a good finance Minister who are good in economics .and finance ..
    3 million Sri Lankans work and live abroad ?
    If each one remitte £1000 …or more you could save rupees from this disaster …as Turkish people did..
    Do we have such a patriotic Lankans today ?
    Think out of communal line ..
    Think as Sri Lankans …
    Yet; there ‘re some racist Sinhala idiots …think in racial or communal line even in this difficult time ..
    It is due to racism that we can not collectively work out a plan in issue like this

  • 11

    No need for the public to panic and play into the hands of dirty politics .

    The government needs to look at Turkey’s initiatives and plan a syrayetgy that is viable for Sri Lanka, while the people need to learn to prepare for some temprerary sacrifices for the sake of the nation,The present government can not be falsely held at ransom.

    1) Temporarily stop imports of Any item that is available locally ,from.food ,clothes,cosmetics Alchohol ,Tobacco etc.
    2) Temparyily stop private companies importing medicines and let the SPC import medicines that are extremely important and pass it to the(Importing ) local companies to do the distribution.
    3) ban importing of all vehicles
    (insist people to buy what is available in the market for now.

    4)Stop all thamashas of government spending .

    Encourage people to bring out all their money and put in FDs at least for a year ,no questions asked of the income (no matter what color it is ,black or white ,like What late Ranesinghe Premadasa did one time to stablize and he never betrayed the people on it)
    5) support the exporters with special incentives .

    put all projects that has been funded via Aid and loans on a complete slow mode and if possible halt some .

    Hold on to the dollars ,reduce the amount of cash that can be taken out of the country until world affairs are stable unless its for medical purpose.
    Keep growing the reserves

  • 1

    Agree. Stand corrected.100.Sorry. Anyway 10 years 30 rupees. Re. 3% devaluation please read the 2012 budget proposals.

    • 0

      You can say MR let the Rupee depreciate 3%, he cannot devalue a floating currency.

  • 3

    200 LKR for One US Dollar…
    It is a matter of when, not whether it will happen.

    US has 13 Trillion in Foreign Debt.
    But other countries keep buying and investing in the US like never before
    And keep pushing the value of the Dollar higher and higher.
    That is because they have tangible assets in every valuable sector which the other nations are craving for…

    What has our Lankawe got, except Colombo and the Coastal land around the Island.
    These have already been bought by Foreigners at bargain basement prices .

    All Good Quality Colombo Real Estate soon be Singapore and Hindian owned.
    They will be earning FX and shipping them to their respective lands.
    Dr Ranil and the Yahapalana suckers must thank our Village Women who convert their blood , sweat and tears in to US Dollars in the Middle East and send it back to pay the Fx bills. ..

    Dr Ranil and his mates have increased the national Debt by 10 percent.
    That is extra USD 10 Billion which mostly have gone in to UNP pockets as Santhosams.
    And Dr ranil is still borrowing with the latest a USD 1 Billion to build a Railway through the jungles where a British Built Ralyway has been operating.
    That is more Santhosams to Yahapalana Politikkas.

    If Dr Ranil who sucks up to the West big time can’t stop the ass falling off the Lanlawe Rupphiah , no one else can……
    One significant beneficiary that Dr Wije has missed ,is the Diaspora. in NJ.
    If they haven’t bought real estate yet, this is the best time although the juicy suburbs have already snapped up and the prices of the rest have sky rocketed.
    One lady is asking 1.5 Million for her pad in a High Rise in Kollupitiya..
    However Dr Rudrakumaran the Eelaam PM can now move in with his supporters with this fantastic Ruppiah rate for their Dollar…

  • 2

    Meanwhile, Mahendran is slowly getting away with the scam of the century.
    Gotabaya earlier sent a team to Thailand to apprehend KP and bring him back to Sri Lanka.
    Sirisena and Ranil appear to have a marked reluctance to bring Mahendran back from Singapore.
    Are Mahendran’s Son-in-Law and his deputy still in jail, or have they escaped – no news in the media about them nowadays.

  • 0

    ” US has 13 Trillion in Foreign Debt.
    But other countries keep buying and investing in the US like never before
    And keep pushing the value of the Dollar higher and higher.
    That is because they have tangible assets in every valuable sector which the other nations are craving for…”

    You welcome Sumane for taking a vacation from Biriyani – Kasippu economists’ camp. Economic theories that I heard only developed in UK, US, France and Germany. Nothing of these came out of Cuba or Venezuela. Even Marx and Engels are from Germany and France. Those who stood with Castro & Chavez only imported rice, pol and miris from moon, that is why the dollar is going to shoot above 200Rs.

    What I don’t get is media is reporting even rice is being imported but I heard country had become self-sufficient in rice couple of years ago?

    • 0

      Mally, You got a point..
      IMF , World Bank, and even Asian Development Bank are all run on the Theories which were born in UK and US..
      They are the ones who drive the Kassippu Ruppiahs, Muslim Liras, and now even Native Pesos down..

      Our only hope is what we did after Nanthikdal.
      Borrow from the Chinese and don’t pay back
      Instead give them the use of our Airports and Harbours which are built with their Dollars anyway…
      And they will use them , pay us a decent rent and look after them.

      Your mates in contrast buy our National Assets through Pension Funds, Wealth Funds , Hedge Funds, Your Kids Education Funds . Insurance Funds and a myriad of other Funds .
      They buy them outright from Dr Ranil not lease them ..
      Take the profits overseas . And sell them to other mates Funds ..
      And the poor Lanakaweans not only this generation, but many generation to come have to pay them to make more and more Profits..

      Dr Ranil used those UK and US Economics to add another 10 Billion to our National Debt.
      Most of it went to UNP mates Bank accounts and UNP Coffers.
      Now we have to pay the Chinese and the US And UK and Singapore for the same loan from the Chines for which we had to make only one payment…
      God help us is all I can say..

      BTW your mate Sampathar never talk about Jobs, Employment, Poverty Health Care and Transport in Jaffana, Killinochi and Puduthikuruppu?
      Everything must be hunky dory there I guess.
      Do you know anyone there, who made in to that UN List.?…..

  • 3

    The learned Dr Wijewardhana the former deputy governor of the central bank conveniently forget to mention the reckless salary hikes for the 1.4 million government servants and the subsidizing imports during the 100 day program to buy votes at the parliamentary election was the beginning of the downfall right at the beginning.
    Sir I have read your previous article on this subject in May, you were more forth coming then, and I also read your articles on the grandiose pipe dreams of Export Development Strategy (2025 vision), I am sorry but the latter was funnier than comedy central. The whole plan lacked the strategy to alleviate the biggest hindrance, i.e. the dismal productivity in all sectors. Our exports are not competitive not mainly because the rupee was over valued in 2014 as you said, but because our production costs then and now are far too high.

  • 0

    The layperson is very disappointed that the truth is that no one understands what depreciation of currency is. It seems to be in the eyes of the beholder gawking at the Emperor’s New Cloths. Some see a jolly Royal suit. Some see rags. The pundits say “Both are right” which leaves us even more confused.
    There is this graph showing depreciation of SLR against US$ from 1995. What do you do with it? Nothing nothing nothing. Every country will examine graphs of their own!
    This depreciation-thingy is a side effect of this floating exchange rates.
    There was this fixed exchange rates. This had the devaluation disease Any cure? No.
    Politicians prefer the floating because they can blame outside influence.
    Some countries which tried a mix of floating and fixed (like Zimbabwe) saw clowns in trillions.
    This depreciation of the currency relative to the dominant US$ will be there and we should draw up plans which includes this.
    Be prepared for a devaluation of the US$ as a distraction in the Trade War. Then what? Mind boggles.

  • 6

    For ‘Pete’s sake when are the politicos in charge of the ruling coalition ever going come to their senses ?

    Come on, this is not Turkey that you politilely request the People who’s breasts are filled with True nationalism and patriotism that they respond , most lankans want only one thing how to explotite the bleeding economy of the Country .

    Look either you have the iron in you to do what is correct for the country not politically correct .

    You need to immediately bring in a temporary law to the cabinet to curbe and stop anything that effects our ruppee and endorse the law with a iron fist until the rupee stabilizes and ofcuase until Trump makes peace with China ,if not it is fair to handover the government to Mahinda ,he will not rock the baby he will deal with a iron fist .
    Sri Lankans of all.communities Sinhalese, Tamils ,Muslims and others have the same attitude ,soft hearted politics or playing by politics will end this country in bankruptcy.
    Mahinda has an Iron fist ,I don’t know what else he has ,as not a single accusation has been proved and on the contrary the present government proxies are behind bars with solid evidence ,while even with evidence some of his members could not be done with

  • 3

    Beaware of The White Lotus
    There is not a single people in this whole wide world you can compare with The Chinese ,
    when it comes to the extend of seriousness of loosing face ,ask any Chinese and he will admit it.

    Chinese will rather commit suicide than loose face.

    If out think Trump’s done with The Chinese you may be very wrong and it even may be better to start thinking of investing in Euros as I strongly believe it will replace the dollar in future ,I can not say when but it will ,it has to no other way .
    China may start investing in it to give it a kick start

    Let’s wait and see ,don’t invest in dollars for long term as long as you are dealing daily and if you have the cash go and make hay while the sun shines

  • 2

    @Fat teema ,can you just go and get a Camel and get what you need badly and stop mocking the poor .

    Our Maids are great battalions unlike some whxxxx

    • 0

      A typical mee-harakek, not to understand what is said.

      “Our Maids are great battalions”

      Of course, and that is the reason many worthless men in clean dress and enjoy bottle life – ultimately we have a maid-driven economy, take it or nor, this is the truth.

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