Economic experts have revealed that the central bank’s artificial influence on the foreign exchange market has provided the basis for the government’s propaganda that the rupee has strengthened in recent days.
Among these, a powerful revelation has been made by Dr. W.A. Wijewardena, a former Deputy Governor of the Central Bank of Sri Lanka.
He had commented on the rising rupee and the loan amount to be received from the International Monetary Fund as follows.
The value of the dollar decreased and the value of the rupee increased due to attempts to artificially control it. The government wanted to demonstrate to the world that its policies were successful and that the value of the rupee was gradually rising.
Although not in accordance with the basic economic principles, the government worked artificially to raise the value of the rupee. It was only later that the Central Bank realized that it was disadvantageous.
Although there are advantages for people who import goods and people who get education and health services from abroad, it is a disadvantage for exporters who bring dollars to the country, Sri Lankan workers working abroad and tourists who come to Sri Lanka. Then the way we get dollars is blocked. After realizing that, the Central Bank intervened in the market and bought the amount of dollars that had been issued to the market in excess. Thus, the central bank prevented the rise in the value of the rupee and caused the value of the rupee to fall again.
The story that the central bank’s reserves have risen to three billion dollars is false. There are actually 2.2 billion. 1.5 billion of which is 10 billion yuan received from China under the currency exchange system. Those yuan can only be used to buy goods from China. On the other hand, those yuan can be used after Sri Lanka’s foreign reserves are sufficient for three months of imports. It is a Chinese condition. Therefore, it is inappropriate to add those yuan to the reserves. But the central bank has added that yuan to the 2.2 billion.
When those 10 billion Chinese yuan are deducted, the reserves of the central bank will be 700 million dollars. There are reserves of the International Monetary Fund within that 700 million. We cannot use them. Also, gold reserves cannot be used. Accordingly, the actual amount of reserves that we can use is about 500 million US dollars. Including the 10 billion yuan received from China in the reserves is misleading to the people of the country. Therefore, that mistake should be corrected.
Now Sri Lanka does not pay installments or interest on its foreign loans. When the payment of loan installments and interest is resumed, Sri Lanka is again in trouble. Again have to go to strict restrictions. Fuel has to be supplied under the rationing system. The import of goods has to be further restricted. Rations and regimes have to be re-imposed. All indications are that the future is very bleak. Again the probability of oil queues, gas queues is high.
If the plan to provide relief to Sri Lanka is approved by the Board of Directors of the International Monetary Fund on the 20th of March, we and the country will get a little relief. So let’s hope we get that approval. But everyone who governs should understand that the country’s economic problems will not be solved by that alone. The economy can be re-energized by oxygenating the production machinery. But the government has not come up with a program for that yet.”