Garvin Karunaratne, former GA Matara

Dollars are sold to the highest bidder to keep on importing Luxury goods while refusing $ for food and medicines” reveals what is really happening today.

In reality today dollars do come in to the banks and to the private currency dealers and the bank are charged with handing over twenty percent to the Central Bank. The other eighty percent is left to the banks for sale to customers. As far as I know there is no restriction placed on private currency dealers and they have a heyday of buying and selling foreign currency.

Selling is to the highest bidder. Who gets the profit?

In this connection what did really happen on 25 th January 2001 reveals : I quote

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

On 25 th January2001…the two State banks(Bank of Ceylon and Peoples Bank) had to pay a big import bill and because they did not have sufficient dollars they had to purchase dollars from other banks”

The two banks then went hat in hand searching for dollars from other banks and a foreign bank that had the dollars agreed to sell dollars at Rs 106 to the dollar when that morning the rate was only Rs 85 to the dollar. The Rupee had been free floated and the bank that had purchased the dollars had the right to sell to the highest bidder and that was at Rs 106.00. It caused an immediate devaluation. The Central Bank when questioned, said:

in a free floating regime the market forces determine the exchange rate. The Central Bank does not intervene in the process. The Central Bank has control over the domestic money supply and it could be used to curb inflation.”(The Island: 17/2/2001)

This reveals what does happen to the dollars that are being collected today. The Banks have to hand over 20% to the Central Bank and the rest they can sell, as reported by E Con E News to the highest bidder. The private currency dealers and the bank have a heyday of making fantastic profits. I do not know whether they have to hand over 20% to the Central Bank. In the meantime the dollars get sold to importers to import luxury goods while there are no dollars for importing milk foods, medicines and essential food like flour.

Where goes the dollar profits- of course it is foreign banks who yet have the right to repatriate their profits in dollars and all this while the people starve. Starvation has already commenced with some poor families having to live on a single meal a day. The people are in queues to obtain food, milkfood and even flour is in short supply and it was reported that 2000 bakeries have closed down.

It is upto our Central Bank to control the total intake of foreign funds and to direct the funds for essential supplies- food and medicines etc. If this is not done now the present day sporadic protests will move to become Supermarket break ins and food riots. Let that not happen.

It is time for our leaders and our Central Bank to do some deep thinking.

Garvin Karunaratne, former GA Matara

Author of:

How the IMF Ruined Sri Lanka &Alternative Programmes of Success(Godages:2006)

05062022