{"id":102823,"date":"2020-05-25T16:05:04","date_gmt":"2020-05-25T23:05:04","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=102823"},"modified":"2020-05-25T16:05:04","modified_gmt":"2020-05-25T23:05:04","slug":"sri-lanka-needs-to-change-its-monetary-unit","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2020\/05\/25\/sri-lanka-needs-to-change-its-monetary-unit\/","title":{"rendered":"SRI LANKA NEEDS TO CHANGE ITS MONETARY UNIT"},"content":{"rendered":"

BY EDWARD THEOPHILUS<\/strong><\/em><\/span><\/h2>\n\n\n

Historical\nevidence of Sri Lanka unambiguously indicates that she had been used monetary\nunits in assorted names in the past before the current monetary unit, Rupee\nintroduced into the country.  The\nfascinating coins triumphal arch installed in Bank of Ceylon Head Quarters in\nColombo displays the models of different monetary units had been administered\nin Sri Lanka in history.  A controversial\nview on currency printing in Sri Lanka has already expressed by a Sri Lankan\nacademic that counterfeit coins of foreign currencies were printed in Sri Lanka\nbefore 2000 years ago and many so-called archaeologists have not expressed an\nopinion on this matter.  <\/p>\n\n\n\n

Before\nthe rupee has introduced to Sri Lanka as the legally valid monetary unit for\nexchange purposes in 1872, several monetary units were used during the European\nrules, and Prot\u00e9g\u00e9es used their currency unit, and Dutch administration used\nmonetary units imported to Sri Lanka from Indonesia. Robert Knox, who was a\nmoving prisoner in the country during the regime of King Senkadagala Rajasinghe\nhad recorded that Portuguese and Dutch monetary units were used as valid\nexchange units in the Kandyan Kingdom too and King Rajasinghe also accepted\nsuch foreign monetary units as valid currencies for exchange purposes.<\/p>\n\n\n\n

After\ntaking over the power by British rulers, Sri Lanka was introduced British pound\nas the valid monetary unit and historical evidence denotes that first batch of\ntreasury notes for exchanging purpose was issued in 1927 canceling the Rix\nDollar unit, which had been widely using in Sri Lanka before the introduction\nof the British pound.  How Rix Dollar\ncame to use in Sri Lanka is formidable to trace in history without clear\nevidence, but it can be assumed that from the later part of Dutch rule in Sri\nLanka to 1827, this particular Rix dollar had been used in the country for\nexchange purposes. The writer of this article has never seen this currency note\nso it is difficult to explain the style of it.<\/p>\n\n\n\n

The\nword RUPEE is assumed to be a term of Bhasha Indonesia (Originated from\nSanscrit) and the Rupee or Rupiah monetary unit is being used as an exchange\nunit in Indonesia, Maldives Islands, Sri Lanka, and India.  The procedure adopted by British Rulers when\nthey were canceling the Rix Dollar unit in the country was the parity of 10 Rix\nDollars to a British pound.  When British\nrulers introduced Rupee into the exchange system of Sri Lanka, the exchange\nrate was one British pound equal to 10 Ceylon rupees.  That exchange rate was higher than the\nforeign value of current USD or AUD.  The\nmost horrible story and the serious question of many Sri Lankans at present are\nwhy the foreign value of Sri Lanka rupee badly depreciated despite the abundant\nthrust of economic development and measures to maintain foreign exchange\nreserves. It is agreed with the economic theory that foreign value to currency\nwould not automatically attract, but it should fulfill certain favorable\neconomic conditions in the country to freely appreciate the foreign value of a\ncurrency unit. The conditions are vulnerable to sudden changes and past\ninformation might not relevant to the present or future.<\/p>\n\n\n\n

After\nthe introduction of Rupee into Sri Lanka\u2019s economy, paper currency was issued\nby the Treasury but that authority was transferred to the Currency Board System,\nwhich established by  No 32 Currency\nOrdinance of 1884.  There is no argument\nthat Currency Board System was an authority of a dependent economy, however,\nthe system was able to maintain the stability of the external value of Sri\nLanka rupee to a certain extent compared to the weak independent central\nbanking, which is powerless when the foreign value of the currency is subject\nto a sharp decline in the open market. Although it is the prime objective of\nthe monetary authority of the country as indicates in the original central bank\nact the central has failed to achieve the prime objective.  <\/p>\n\n\n\n

Another\nweak central bank policy of Sri Lanka is it has no strict policy focus on short\nterm market intervention to secure the value of the currency as it has a lower\nlevel of reserves to make quick buying and selling activities to adjust the\nrate and the International Monetary Fund may not agree with a short-term play\nto maintain the value of Sri Lanka\u2019s rupee when there is a small quantum of\nforeign reserves.<\/p>\n\n\n\n

It\nis also an issue that if the central bank goes such practice, can the economy\nrespond to bank actions bearing losses or gains might be created.  The strategic plan to stabilize the foreign\nvalue of Ceylon rupee under the Currency Board System was the linking of Sri\nLanka rupee operations with the British pound and the influence of a strong\neconomy supported to stabilize exchange value at the money market.  The strong economic conditions not in one or\ntwo sectors but the favorable conditions in the entire economy are the secrets\nof strong currency value in any country. We can see that many problems in Sri\nLanka\u2019s economy despite the favorable reflections after 2010 especially to the\ngovernment budget and the balance of payment.<\/p>\n\n\n\n

Although\ncertain socialist economists in Sri Lanka (Gunesekera, H.Ade S, From Dependent\nCurrency to Central Banking in Sri Lanka) criticized the linking Sri Lanka\nrupee with the British pound under the Currency Board System pointing to\ncertain fluctuations, which had been occurred in line with the British pound.\nIt is proud to note that the exchange parity of Sri Lanka rupee with the\nBritish pound remained higher, when Sri Lanka gained political independence in\n1948, one British pound was equal to 13 Sri Lanka rupees.  The history of European monetary units\ndemonstrates that they were badly depreciated due to wartime economic\ndepressions or recessions but they always recovered as soon as possible by the\nuse of appropriate economic policy actions. \nTherefore, the fluctuation of rupee value under the Currency Board\nSystem was not too bad to make extravagant criticism.  <\/p>\n\n\n\n

After\nindependence in 1948, Currency Board System in Sri Lanka was canceled in terms\nof the recommendation made by John Exter and established the Central Bank of\nSri Lanka with several fundamental objectives about to foreign and domestic\nvalue of Sri Lanka rupee.  Although these\nauthoritative changes have not been effective for radical changes in linkages\nof Sri Lanka rupee with British Sterling Pound as the major export companies of\nSri Lanka were listed in London Stock Exchange and the price of export\ncommodities was tagged in British pound.<\/p>\n\n\n\n

When\ncontemplating other countries where are used rupee as the monetary unit, Sri\nLanka uses cents as a single subunit, and other countries use deviated named\nsubunits. For example, India could be given. \nWe can imagine that the reason for a single named cents\u201d for the\nsubunit is that Sri Lanka had been used Rix Dollar and Cents before the\nintroduction of rupee in 1872. \nTherefore, the Rix Dollar name for the currency unit of Sri Lanka is\nunique and has a significant historical value and the country can rethink to\nreplace the Rix dollar and cents under the current modernization process. After\nwinning the terrorist war in 2010, Sri Lanka has become a new country with\ndifferent attitudes and people of Sri Lanka committed to modernizations and the\napplication of new technology and greater cooperation with other countries\nirrespective of the political ideologies.<\/p>\n\n\n\n

While\nSri Lanka rupee had been linked with the British pound sterling foreign value\nremained in a stable parity until the official depreciation of the British\nsterling pound in 1967. The devaluation of Sri Lanka\u2019s currency was subject to\nover-value the Rupee at the foreign exchange market, and had potentials to\ndisadvantages to the export economy.  The\ngovernment of Mr. Dudley Senanayaka officially depreciated Sri Lanka rupee by\n20%, which was advised by the International Monetary Fund despite criticism\nmade by left political parties on the rising the cost of living and giving a\nfairly higher pay rise to Sri Lanka\u2019s workforce.  Although left political parties promised to\nrevalue Sri Lanka\u2019s Rupee when they will come to power in 1970, the elected\ncollision government did not revalue Sri Lanka rupee and the cry of left\npolitical parties on the revaluing of foreign-value of Sri Lanka\u2019s rupee was\nrhetoric to attract political supports at the election rather than implementing\npolicy actions.  The policy action to\nofficially depreciate Sri Lanka rupee by 20% in 1967 was an accurate decision\nfor securing the export market.  <\/p>\n\n\n\n

In\naddition to official devaluation, Foreign Exchange Entitlement System which was\nan unofficial devaluation strategy introduced in 1968 had been subjected to\ndevalue Sri Lanka rupee by 30%, and since then Sri Lanka rupee was gradually\ndistancing from the British pound and aligned to USD.  However, unexpected market shocks in 1972 to\nUSD, and gold parity, and Oil crisis in 1973 laid a foundation to further\ndepreciate the foreign value of Sri Lanka rupee but adjustable peg system and\nmanage currency policy of Central Bank were able to maintain artificial foreign\nvalue for Sri Lanka rupee despite international advice for depreciation or\nfloating the currency.  In 1974 one USD\nwas approximate with 6 Sri Lanka rupees, which was a favorable condition\nwithout sufficient foreign currency or gold reserves but invited tight exchange\ncontrols for international capital movements.<\/p>\n\n\n\n

When\nSri Lanka\u2019s economy was opened to the world in 1978, Sri Lanka rupee hasn\u2019t had\neconomically strength environment for facing domestic and international\neconomic trends, and the pressure mounted from the terrorist war situation\nsince the early 1980s to 2010, the foreign value of Sri Lanka rupee\ndramatically eroded despite the positive objectives of the Central Bank to\nmaintain the domestic and foreign value of Sri Lanka rupee, which currently\nvalues one USD equal to more than 180 rupees. \nThere is no doubt that the floating of rupee is appeared to be beyond\nreality.  <\/p>\n","protected":false},"excerpt":{"rendered":"

BY EDWARD THEOPHILUS Historical evidence of Sri Lanka unambiguously indicates that she had been used monetary units in assorted names in the past before the current monetary unit, Rupee introduced into the country.  The fascinating coins triumphal arch installed in Bank of Ceylon Head Quarters in Colombo displays the models of different monetary units had […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[124],"tags":[],"class_list":["post-102823","post","type-post","status-publish","format-standard","hentry","category-edward-theophilus"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/102823","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=102823"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/102823\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=102823"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=102823"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=102823"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}