Written by Tharushan Fernando
23 Sep, 2015 | 9:22 pm
With the Central Bank’s decision to float the exchange rate of the rupee against the US Dollar, the value of the rupee has depreciated to record lows.
On Tuesday, the rupee recorded its highest depreciation against the US Dollar, when one US Dollar was valued at Rs.141.
It is the normal process for the Central Bank of Sri Lanka to get involved in order to bridge the shortfall faced when carrying out daily foreign transactions, including importations, by bridging the shortfall through reserves, in order to keep the country’s exchange rate stable.
Economists argue that even though this is a short term solution, it does not help the country in the long run. On September 4, the Central Bank of Sri Lanka, stopped its inter-mediation in the market rate of the rupee, and allowed that the exchange rate be floated.
The dollar which was valued in the Rs.135 range in the first week of September, has now risen to Rs.142.
According to the currency exchange rates released by the Central Bank of Sri Lanka on Wednesday, the value of one US dollar stood at Rs.142 and 92 cents.
With the rupee depreciating against the dollar, the benefit flows to exporters and foreign currency earners. However, the prices on a number of imports including motor vehicles, food items and other imported goods have seen a sharp increase in the past few weeks.
Chairman of the Pettah Food Importers Association, K. Palaniyandi said that even though they had planned to hold discussions with the government in order to decide on the prices of food items, since the meeting had been cancelled, prices would be decided based on the existing currency exchange rates.
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