Steve Hanke provided some advice to the Sri Lankan Government to stop the further depreciation of the South Asian island nation’s official currency, the Sri Lankan rupee.
The American economist, who is a professor of applied economics at Johns Hopkins University in Baltimore, Maryland in the United States, floated the idea of installing a currency board amid the Sri Lankan rupee devaluation and rising inflation bedeviling Sri Lanka.
We feel concerned about the Sri Lankan citizens facing multiple socioeconomic challenges today. We believe it is best our readers also learn this latest news about the Sri Lankans’ plight.
By sharing this latest foreign exchange-related news with our followers, we believe we can help them stay properly informed and proactive on how they can handle their units of Sri Lankan rupees amid the difficult times.
Sri Lanka’s official currency, the Sri Lankan rupee, has depreciated significantly as the citizens face the impacts of the coronavirus pandemic, rising inflation, and the ongoing Russia-Ukraine armed conflict. The Sri Lankan rupee has risen to 320 Sri Lankan rupees versus the US dollar.
At the time of writing, US$1 is equivalent to 292.03 Sri Lankan rupees, per Xe.com. The latest foreign exchange development in Sri Lanka comes with various economic dilemmas besetting the society.
There has been a significant hampering in foreign currency inflows into Sri Lanka, resulting in a serious gasoline scarcity. Additionally, gasoline and diesel’s costs have reached all-time highs.
A gas cylinder’s price has been raised to 4,190 Sri Lankan rupees, or US$14.44 at the time of writing, and cooking gas is presently in short supply in Sri Lanka. These events have led to the cost of food items rising dramatically.
Ninety percent of Sri Lanka’s eateries are closed because of the gas cylinder blockade in the South Asian island nation, making the restaurants with wood stoves the only dining venues open for business. Moreover, snack prices at dessert shops and bakeries have surged.
In Sri Lanka today, citizens will find rice costing 100 cents or 1 Sri Lankan rupee per kilogram (less than US$0.01), eggs costing 36 Sri Lankan rupees (US$0.12), and chicken costing 1,000 Sri Lankan rupees (US$3.45). These instances of rising inflation in Sri Lanka are coupled with the depreciation of the country’s official currency.
Based on the report posted online by EconomyNext, a Colombo, Sri Lanka-headquartered news outlet delivering the latest reports on markets, economy, politics and public policy, Hanke posted a Twitter message, citing that the Sri Lankan rupee has depreciated less than 26 percent against the US dollar since January 1.
The US economist pointed out that Sri Lanka’s recent fuel price hikes and severe balance of payments crisis are sinking its economy. Hanke recommended that the Sri Lankan Government establish a currency board like the one the country had from 1884 until 1950 to ease the economic crisis.
He said this mechanism would halt the Sri Lankan rupee’s further devaluation. We appreciate Professor Steve Hanke’s suggestion.
We gathered that Sri Lanka, which was known globally as Ceylon in the past, set up a currency board in the late 1800s up to 1950 after the Ceylon rupee the Oriental Bank Corporation issued stopped exchanging silver for rupee notes.
This incident was technically called a suspension of convertibility. For a currency board, the anchor currency can be the US dollar, Singapore dollar, euro, Swiss Franc, or Swedish Kroner, which are the official currencies of the countries with the best monetary policy in the world today.
We suggest the Sri Lankan Government consider Professor Hanke’s advice to help its Sri Lankan rupee’s value, and most importantly, aid the citizens who are tremendously struggling in these economically challenging times.