How to manage our foreign exchange in this time of Crisis
Posted on January 3rd, 2022

Garvin Karunaratne

Veteran administrator,  Sudat Gunasekera former Secretary to the Hon Prime Minister , has said in his Paper  What the Government should do to get rid of the present financial crisis ailing the country? in Lanka Web, 2/1/2022 what measures Sri Lanka has to take to get out of the financial  mess we are in. I  too think that his  suggestions are the only way  ahead. 

Let  us look at what happened to Turkey when Turkey allowed a free float of the Turkish Lira and  to other countries  when they  did what the IMF wanted it to do.

I quote from my book: How the IMF Ruined Sri Lanka & Alternative Programmes of Success;(Godages) 2006:

Over the period  ” 1983 to 2003, the devaluation of the Turkish Lira was  to the extent of 712,000%, the Ghanian Cedi to the extent of 275,000%  and the Nigerian Naira to the extent of 21,800%.”

“The Turkish Lira has been devalued 1715 times. and the Ghanian Cedi  663 times  in the period 1983 to 2005.”

” The Turkish Lira has dropped  in value from  Lira 336 to the pound sterling in 1983  to Lira 2,395,000 to the pound in 2003, marking  a devaluation of 712,000%. “

” I have travelled widely in Turkey in 2004 and have been struck with the abject poverty- the people have no purchasing power whatsoever with their earnings. Everything is available in the shops for the rich but the vast majority of people  do not have the purchasing power to buy  the necessities of life with their meager earnings. There are vast highways  with no vehicles in sight for hundreds of miles “

Actually went I visited Turkey in 2004, I had to empty one of my suitcases to carry the Lira I got when I cashed a few pounds.

The only way ahead to my thinking is to reject the IMF and go it alone as Governor Cabral opines, but follow the blue print of how we ran the country in the Dudley Senanayake days- 1965 to 1970. We were very strict. There was no foreign funds for any luxury items. No one was allowed dollars for foreign study. The only exception was a grant to Chandrika and her sister Sunetra and I had the occasion to ask the Prime Minister why he did give that grant. He replied  that this was the only request he had from a former Prime Minister and he felt like giving it.  Then as the Additional Government Agent at Kegalla one of my tasks was to meet the Prime Minister at Warakapola Rest House every Saturday and Sunday morning at eight and after some tea, we attended at least ten meetings arranged by us or by his supporters, I was with him from eight in the morning to around seven in the evening till he took off in his Humber Hawk back. and I had to answer all his questions.  There was never a question of meeting any villager who said that he was deprived the necessities of life.  Then  all essentials were bought with the meager dollars we had and there were no kero or milk food queues. The necessities were all imported and a rationing system was strictly enforced. For  foreign travel no dollars were issued whatsoever. Even to go on pilgrimage to Buddha Gaya one had to make an application to the Controller of Exchange of the Central Bank to plead and get it.

It was a strict control and I happened in 1970 to be the Deputy Director of Small Industry to give allocations to small industrialists. I thus speak through sheer experience.

Garvin Karunaratne

2/1/2022

Author of How the IMF Ruined Sri Lanka & Altenative Programmes of Success,  Godages, 2006

How the IMF Sabotages Third World Development, Godages, 2017

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