Local Business Leaders Lament Forex Shortage And Continuous Money Printing 
Posted 8,December

By Chaveendra Dunuwille

In Local News

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Local business leaders expressed their views and concerns about Sri Lanka’s current financial situation in the Sri Lankan Economic Summit 2021, organized by the Ceylon Chamber of Commerce. 

The business leaders noted that the forex shortage resulting from 200 to USD non-credible peg has significantly disrupted business activities. The Central Bank no longer provides convertibility, and the partial suspension led to parallel markets recording 240 to USD for kerb markets and Hawala remittances. 

The Central Bank continues to print money to maintain a 6.0 policy rate while releasing limited dollars for oil and medicine. According to Krishan Balendra, CEO of John Keells Holdings PLC, “the gap between the informal market rate and the official rate has resulted in a dollar shortage.” 

The REER estimates Sri Lanka’s effective exchange rate as below 100. The increasing gap, as mentioned previously, has resulted in reduced remittance as migrant workers are switching to unofficial sources such as Hawala. Exporters are now using loopholes to not bring in Dollars to Sri Lanka as it risks sharp depreciation. 

The Central Bank has taken several steps to bridge the remittance gap. They presented a remittance scheme that grants LKR 10 for every dollar converted to address the issue. Furthermore, the CBSL is partnering with local authorities to curb unofficial sources.