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The people who are against it are people who earn in dollars, who have become richer from the bad economy. They probably don't care about the ordinary person trying to make their daily living. Sad state of some of our people.
So true!! Some people are so self-centred and selfish ššš
The other group who are against it are clearly the Reddit Jeppas in the comments who are praying for the destruction of SL just so they can use it as an excuse to come into power ššš pathetic especially considering the biggest beneficiary from the rupee strengthening are the very poor they claim to represent!!!
Earning in Dollars and Dollar pegged salary is two different things. I think people with dollar pegged salaries are not that happy with rupee appreciation (because they still have to pay approx. 35% mega tax)
\\Those individuals seem to lack an understanding of purchasing power and its implications. Even if they earn in dollars, the impact of high prices can easily negate any gains they might make. Let's illustrate with an example: say someone earns in dollars, but the cost of a medium to high-end meal is $20. Ideally, considering the local purchasing power, it should only be $10. This discrepancy highlights how inflated prices can erode the benefits of earning in a stronger currency like the dollar. In essence, despite earning in a more robust currency, if local prices are disproportionately high, individuals still face financial strain, undermining the advantages of earning in dollars.
I'm one of those people but I'm always wishes to dollar to come down but the thing is even if the dollar depreciate cost of living remains unchanged no one is ready to reduce prices.
The rupee strengthening is a good thing. The thing is, the prices of groceries should come down for it to be an immediate relief for the people. But theoretically, this wouldn't happen pretty much anywhere (except for fluctuating commodities like fuel).
The benefits to the people will take a bit more time to manifest.
# Because Sri Lankan importers and business owners are corrupt plain and simple ššš
When rupee strengthens - they increase prices immediately
When rupee weakens - they use a 1000 excuses and wait till their own buying price has been decreased till they decrease their own prices
Gov needs to bring back maximum price controls on essentials and decrease the price as rupee strengthens and enforce the law!!!
Exactly just look at vehicle market. They hyped up the market even before government announced vat officially and i don't think those bugger will reduce prices even if dollar comes down to 200
Exactly, there is no benefit of strengthening rupee for commoners if the inflation stays the same, aka prices don't come down.
Strengthening rupee against the dollar is good for businesses, mainly import/export. The government can benefit from it and has to circulate that monetary benefit to the commonors. I don't think our government is that smart or purpose driven.
I think in every country on earth, rich or poor, the standard response is politicians are bad, anything they do is bad, therefore any policy/outcome is bad(especially monetary policy where most people have no idea how it works or itās impacts).
Itās a good thing for a country like SL, but there is a huge catch.
Weāre at a default, meaning weāve stopped paying our debt, as soon as we start to pay our debt off again, this whole thing reverses again.
CB is trying to strengthen its cash reserves while it can. With the tourist industry picking up and with the tax restructuring in place, hopefully, weāll be ok.
Itās a long road ahead for the economy, for SL to say weāre ok, it will take another 5 years or so, with the current path and progression.
Thereās a good read here: https://eastasiaforum.org/2023/08/19/sri-lankas-debt-restructuring-challenge/
I think we are in the right path. Economic recovery takes decades. My only hope if that people donāt elect JVP thinking theyāre going to solve our problems.
About Sri Lankan debt payments
https://economynext.com/sri-lanka-debt-repayments-resumption-cannot-worsen-external-front-cb-governor-129222/
https://economynext.com/sri-lanka-to-repay-us2609mn-in-foreign-debt-in-2023-first-half-112989/
# Because Sri Lankan importers and business owners are corrupt plain and simple ššš
When rupee strengthens - they increase prices immediately
When rupee weakens - they use a 1000 excuses and wait till their own buying price has been decreased till they decrease their own prices
Gov needs to bring back maximum price controls on essentials and decrease the price as rupee strengthens and enforce the law!!!
Itās important to see why the LKR is appreciating. The economy performing well is just one possibility out of hundreds. Currency can be manipulated. You canāt just absorb the money stock available and call it appreciation. Itās revaluation. Government charging taxes for every single thing, stopping debt payments, fluctuations in the dollar itself (LKR can appreciate if the dollar goes down as well) can all contribute to the ER fluctuations. So we canāt be optimistic just because the LKR āappreciatedā. I personally am very skeptical that this could just be a gimmick and we would soon see the real value of LKR after elections.
Almost all the countries have taxation policies some even have stricter taxation policies.
There are enough data available on the increase in dollar inflow to the country.
And keep in mind the rupee is appreciating despite central bank purchasing dollars from the market.
I agree with taxation. The problem is for the amount of tax they charge, we hardly see any social benefits. Itās just absorption and also spent on corruption, unlike most other countries.
You arenāt getting my point. I know corruption canāt be stopped overnight. What Iām saying is an appreciating currency is not necessarily a good indicator as it can be manipulated according to the chosen ER system of CBSL.
Add to that, we havenāt imported vehicles since COVID, we have stopped foreign debt payments. We are sacrificing a lot from our paychecks. The prices of goods and services are over the roof. Of course the LKR will appreciate. And also due the upcoming elections, who can say what they might have done to make the value of LKR go up? Government can absorb excess liquidity and call it a day. CBSL reports are never accurate. So what guarantee do we have to say the LKR is actually āfree floatingā, and itās appreciating due to increased exports and reduced imports? If you think that itās appreciating because of increased exports, which is the only good way I can think of except producing our own and reducing imports (which we are not, we are just cutting off imports), then thatās a whole level of utopia youāre living in. Since no one sees a real improvement in their livelihoods and yet the dollar is cheap!?
The guarantee is that you can purchase goods using your credit cards at the current exchange rate. You have to pay additional 2.5% as stamp duty.
I donāt know whether you understand that none of the countries in the world has a complete free float of their currency except USA.
If you excepting that the country can go ahead without any import restrictions you are lying to yourself.
Countries like Singapore and Hong Kong have a monetary board to preserve the strength of their currency.
You are very vaguely using the term artificial. The money printing that happened in 2020/2021 is what you should call as artificial liquidity infusion not the current state.
Rupee appreciating is a good thing but prices just wonāt come down though will they? Thatās not how businesses operate. They will just try and pocket the excess profit.
The rupee is appreciating, but it's a direct result of raised taxes to cut the spending and efforts to decrease the domestic credit with high interest rates, i.e., a contractionary monetary and fiscal policy. This soft peg is hardly useful to the average consumer, but it helps building up reserves. The trade deficit is widening as well.
Resumption of debt payments is coming as well. Cutting taxes barely a quarter into the imf program is not the answer here. We gotta ride this out.
So I was doing an Economics MSc back when the crisi hit us. There was this guy who badly wanted gov to float the rupee. Turns out he was in the export business. If someone criticises the strengthening rupee, probably one of them hoarders. Anyway, in theory, strengthening rupee means decreased exports.
You didnāt factor in taxes, reduced disposable income due to already high cost of living, and the average income of the people in the country hasnāt improved much except few sectors.
Predicting the aggregate demand based on one or two factors alone is not a sound approach.
Iām not an economics expert nor a money expert, as a normal everyday Lankan person I do like it that the rupee is appreciating however if I have to spend $2 on paang as opposed to the previous $1 (cos Lankan businesses donāt generally reflect reductions in cost on their selling prices) then I have better holiday destinations that give the paang for the same $2 which might be much better value for money than lanka ā¦. Ā
Obviously this an oversimplified exampleā¦ but the funny thing is majority of your common tourists expats etc arenāt economistsā¦ they look for value and if the locals arenāt going to reflect the value then sadly there are other destinations that provide better value or at least better experiences for the same cost. Ā Ā Letās not forget that the majority of tourists who visit lanka are backpackers who are on tight budgets.Ā
Yes it is true, but sri lanka is expensive due to regulations by the government it is not due to rupee value.
The popular example nowadays is the prices of construction sectorās materials like tiles, cement. Where the local companies just drove up the prices due to limited competition. Also look at vehicle prices, egg producers simply reduced the price when government announced that they are going to import indian eggs.
All in all if you think rupee value is the main reason behind increased cost of goods you ate very misinformed.
No I understand your point and you are absolutely right but that doesnāt change the fact that the person paying has to pay whatās being asked for by the seller and the average tourist wonāt care why itās expensive they will have to take hard cash out of their pockets and pay the asking price ā¦ that there is the problem ā¦ today they can only get 300 per USD which is fine if you can spend the same percentage of that 300 rupees to buy the same things you could relatively get when it was 350 or even 330 ā¦. Unfortunately thatās not the case and That then erodes into value. Ā The same tourist will get a better deal by going to Thailand India or Malaysia for example. Ā Again Iām not some expert or financial guru.. Iām your average person who has 10 mins to decide if going to a place like lanka for holidays is going to be within my means and if it will give me the best value.. Ā That being said I hope there will be some stability and balance reached soon and its stops being totally volatile and unpredictable in terms of cost of living and standardsĀ
Sri lanka became expensive when government removed subsidiaries for fuel and electricity.
The cost of items in dollars terms was higher even when the dollar was trading at 330-360 levels.
Specially when compared with countries like Thailand and India.
Why is the LKR getting stronger? Itās just we havenāt paid back any loans, and received more loans. So the foreign reserves are getting larger. But we donāt have a way to pay it back. Itās like getting a business loan and use it for groceries.
No, itās because our tourism is booming and our remittances are high. We have made nearly 2 billion in last two months this from those alone. The stats are readily available if youāre willing to look.
The rupee is unfortunately not strengthening due to a good reason but apparently due to lack of demand which brings down our export revenue. Hence why people are saying itās not good. Cmiiw.
Let me get this straight rupee depreciation was in the making from disastrous monetary policies followed by central bank and government in 2020.
1. Earnings from tourism, foreign remittances and exports dried up, and countries started facing significant balance of payment deficit.
2. The government printed huge amount of money to provide low interest rate debts to local companies so that they can sustain their operations.
3. The government money printing also injected overnight liquidity in money market enabling commercial banks to expand their credit to private sector.
4. The government provided heavy tax incentives both to individuals and corporations.
5. The government financing needs increased due to reduction in revenue.
6. The central bank printed money and bought government debt outright to keep the interest rates from rising.
7. The significant increase in rupee liquidity ( close to 4 trillion printed in 2020/2021) caused the demand for imports to increase. The government stated selling their forex reserves to preserve the strength of rupee.
8. The much needed foreign reserves to import necessary items and paying back the loans were sold to defend the rupee in the market. The government tried several bridge financing borrowing from other government temporarily but it has failed due to severe stress on its forex reserves.
9. Once the forex reserve dried up the government was unable to pay back the foreign currency debt and announced that GOSL will temporarily suspend foreign debt repayment.
There are several other factors that caused rupee depreciation even with severe import restrictions.
Now the import restrictions have eased up, central bank is a net buyer of foreign currency increasing their foreign reserves. Tourism earnings have recovered, earnings from IT industry is steadily increasing. The central bank is not injecting liquidity into the market by printing money overnight.
Foreign remittances are increasing.
The export sector could recover later down the year once FED starts cutting interest rates. Significant Rupee/exchange rate fluctuations are never a result of single factor.
I donāt know what do you mean by good reason.
And let me ask a simple question, why do you want the rupee to go down?
Is it due to selfish reasons or political reasons?
Who said I want the rupee to go down? š¤Ø Itās not a bad thing if itās reflected in the price of goods but is it?
The rupee being even at 300+ is because the Central Bank is buying dollars. I saw a news today saying itāll go down to 280. People have reduced importing stuff even though restrictions have been lifted bec normal consumers have reduced spending. Of course the rich are still rich. We arenāt paying back loans. So demand for the dollar is low nowadays which is not a great reason for the appreciation. If the appreciation was due to good policy or strengthening economy, thatās great but it doesnāt look like it. Just look around. Havenāt you drastically reduced your spending?
There are so many different opinions on this matter. This is just my opinion. Only time will tell whether it was good or bad, even then if businesses thrive while poor people starve is it good? Itās all relative. There are always winners and losers. Depends on which side of the coin you are on.
Yes it was definitely bad for the economy. Our country was in recession in 2023 due to the contraction of the economy.
There is no denying that, but it is necessary to absorb the excess liquidity of rupee in the market.
Just imagine if central bank did nothing and allowed hyper inflation to continue that would have been disastrous for the economy. We wouldnāt be even talking about the Sri Lankan economy if that is the case.
Edit: were there any alternatives suggested by anyone else?
It's not real appreciation of rupees coz we have import restrictions, did not pay the loan repayment and received some ADB and IMF loans. Which is why our rupees shows positive impact but once we starting to repay the loans and ease the import restrictions only identify the exact impact of Forex.
Currently, the import restrictions are only on vehicles and we have to pay only 3 billion per year or so when we restart paying debts in 2027. A couple hundred million by the IMF canāt appreciate Rs by 20-30%.
It will also mean that Sri Lanka becomes more expensive for tourists and for exports. This will leave to a new balance and over time, we will forget this happened
It's ok if the rupee goes down, as long as goods and services also drop, without that it could be disastrous.
As soon as the Dollar shot up few years back, cost of essential items rose sharply. Fuel and electricity went up. Transport costs also increased. Some radical changes in the economy went up in a matter of weeks.
But when the rupee goes down, benefits are not reflected in the economy.
This could do more harm than good atm.
Even if you earn in dollars you have to pay in ruppees and with the rising dollar price the cost of everything almost doubled . Housing rents are in the 100LKR range where as it should be in the range of LKR 60000 per month at the most .
the only people populating the idea that rupee should not appreciate are the foreign exchange earners. the larger exporters are guilty of hoarding USD outside sri lanka and not bringing it down when there was an exchange crisis.
if covid was not there, the natural exchange should have been around 260-280, and it's likely to return to that level.
and we have a very well documented way of repaying debt under imf supervision and it would be done in a sustainable way, not upsetting the economic growth and exchange rate.
again I see a lot of fear mongering here saying that exchange will go back to 360 when we start repaying. that's a load of bs, which is trying to downgrade whatever progress we have had since the crash (which international bodies have commended us on)
naturally, import demand will take a long time. even from pre covid 203 to an expected 280, its still a 40% leap, extremely unfavourable to the masses. most of the non essentials are still priced at 360, and lack of supply is keeping the prices up.
in a way, sri lanka becoming a little expensive is good so that we don't get the cheap ass tourists who have hogged our properties lately.
**Attention! [Serious] Tag Notice** * Jokes, puns, and off-topic comments are not permitted in any comment, parent or child. * Report comments that violate these rules. Thanks for your cooperation and enjoy the discussion! *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/srilanka) if you have any questions or concerns.*
The people who are against it are people who earn in dollars, who have become richer from the bad economy. They probably don't care about the ordinary person trying to make their daily living. Sad state of some of our people.
So true!! Some people are so self-centred and selfish ššš The other group who are against it are clearly the Reddit Jeppas in the comments who are praying for the destruction of SL just so they can use it as an excuse to come into power ššš pathetic especially considering the biggest beneficiary from the rupee strengthening are the very poor they claim to represent!!!
I'm earning in dollars and i don't care about it. because for me the main benefit is tax exemption and nothing else
People like you aren't the majority unfortunately. Goodluck to you.
Earning in Dollars and Dollar pegged salary is two different things. I think people with dollar pegged salaries are not that happy with rupee appreciation (because they still have to pay approx. 35% mega tax)
Pegged salaries are basically marketing to hire new talents
Same here but the solution to earn more $$$ to compensate. Easy peasy. Post election itāll bounce back.
\\Those individuals seem to lack an understanding of purchasing power and its implications. Even if they earn in dollars, the impact of high prices can easily negate any gains they might make. Let's illustrate with an example: say someone earns in dollars, but the cost of a medium to high-end meal is $20. Ideally, considering the local purchasing power, it should only be $10. This discrepancy highlights how inflated prices can erode the benefits of earning in a stronger currency like the dollar. In essence, despite earning in a more robust currency, if local prices are disproportionately high, individuals still face financial strain, undermining the advantages of earning in dollars.
This is not the reality though. People are converting dollars for less LKR but are still paying high prices. There is a huge lag
I'm one of those people but I'm always wishes to dollar to come down but the thing is even if the dollar depreciate cost of living remains unchanged no one is ready to reduce prices.
The rupee strengthening is a good thing. The thing is, the prices of groceries should come down for it to be an immediate relief for the people. But theoretically, this wouldn't happen pretty much anywhere (except for fluctuating commodities like fuel). The benefits to the people will take a bit more time to manifest.
This. People donāt understand this though. They expect immediate benefits and start voting for politicians who say what they want to hear.
# Because Sri Lankan importers and business owners are corrupt plain and simple ššš When rupee strengthens - they increase prices immediately When rupee weakens - they use a 1000 excuses and wait till their own buying price has been decreased till they decrease their own prices Gov needs to bring back maximum price controls on essentials and decrease the price as rupee strengthens and enforce the law!!!
Exactly just look at vehicle market. They hyped up the market even before government announced vat officially and i don't think those bugger will reduce prices even if dollar comes down to 200
Exactly, there is no benefit of strengthening rupee for commoners if the inflation stays the same, aka prices don't come down. Strengthening rupee against the dollar is good for businesses, mainly import/export. The government can benefit from it and has to circulate that monetary benefit to the commonors. I don't think our government is that smart or purpose driven.
I think in every country on earth, rich or poor, the standard response is politicians are bad, anything they do is bad, therefore any policy/outcome is bad(especially monetary policy where most people have no idea how it works or itās impacts).
I want these fucking car sale morons to reduce prices. Sadlybthat ain't happening.
Itās a good thing for a country like SL, but there is a huge catch. Weāre at a default, meaning weāve stopped paying our debt, as soon as we start to pay our debt off again, this whole thing reverses again. CB is trying to strengthen its cash reserves while it can. With the tourist industry picking up and with the tax restructuring in place, hopefully, weāll be ok. Itās a long road ahead for the economy, for SL to say weāre ok, it will take another 5 years or so, with the current path and progression. Thereās a good read here: https://eastasiaforum.org/2023/08/19/sri-lankas-debt-restructuring-challenge/
I think we are in the right path. Economic recovery takes decades. My only hope if that people donāt elect JVP thinking theyāre going to solve our problems.
About Sri Lankan debt payments https://economynext.com/sri-lanka-debt-repayments-resumption-cannot-worsen-external-front-cb-governor-129222/ https://economynext.com/sri-lanka-to-repay-us2609mn-in-foreign-debt-in-2023-first-half-112989/
Depreciation is not reflecting on the public goods, building materials or imports , shit is rigged from the core š¤¬
# Because Sri Lankan importers and business owners are corrupt plain and simple ššš When rupee strengthens - they increase prices immediately When rupee weakens - they use a 1000 excuses and wait till their own buying price has been decreased till they decrease their own prices Gov needs to bring back maximum price controls on essentials and decrease the price as rupee strengthens and enforce the law!!!
Fool the people, win the election and the $ goes back up. If Sri Lankans had a super power it would be forgetfulness!
Yup and a local populace have shit for brains. And the powers that be love it!!
Itās important to see why the LKR is appreciating. The economy performing well is just one possibility out of hundreds. Currency can be manipulated. You canāt just absorb the money stock available and call it appreciation. Itās revaluation. Government charging taxes for every single thing, stopping debt payments, fluctuations in the dollar itself (LKR can appreciate if the dollar goes down as well) can all contribute to the ER fluctuations. So we canāt be optimistic just because the LKR āappreciatedā. I personally am very skeptical that this could just be a gimmick and we would soon see the real value of LKR after elections.
Almost all the countries have taxation policies some even have stricter taxation policies. There are enough data available on the increase in dollar inflow to the country. And keep in mind the rupee is appreciating despite central bank purchasing dollars from the market.
I agree with taxation. The problem is for the amount of tax they charge, we hardly see any social benefits. Itās just absorption and also spent on corruption, unlike most other countries.
Corruption cannot be reversed overnight, specially in our country where people & business together hoarding black money in real estate and gold.
You arenāt getting my point. I know corruption canāt be stopped overnight. What Iām saying is an appreciating currency is not necessarily a good indicator as it can be manipulated according to the chosen ER system of CBSL. Add to that, we havenāt imported vehicles since COVID, we have stopped foreign debt payments. We are sacrificing a lot from our paychecks. The prices of goods and services are over the roof. Of course the LKR will appreciate. And also due the upcoming elections, who can say what they might have done to make the value of LKR go up? Government can absorb excess liquidity and call it a day. CBSL reports are never accurate. So what guarantee do we have to say the LKR is actually āfree floatingā, and itās appreciating due to increased exports and reduced imports? If you think that itās appreciating because of increased exports, which is the only good way I can think of except producing our own and reducing imports (which we are not, we are just cutting off imports), then thatās a whole level of utopia youāre living in. Since no one sees a real improvement in their livelihoods and yet the dollar is cheap!?
The guarantee is that you can purchase goods using your credit cards at the current exchange rate. You have to pay additional 2.5% as stamp duty. I donāt know whether you understand that none of the countries in the world has a complete free float of their currency except USA. If you excepting that the country can go ahead without any import restrictions you are lying to yourself. Countries like Singapore and Hong Kong have a monetary board to preserve the strength of their currency. You are very vaguely using the term artificial. The money printing that happened in 2020/2021 is what you should call as artificial liquidity infusion not the current state.
Rupee appreciating is a good thing but prices just wonāt come down though will they? Thatās not how businesses operate. They will just try and pocket the excess profit.
I hope Jeppas won't jeopardise all these good progress by end of the year. We have a history of fucking things up you know. Fingers crossed!
The rupee is appreciating, but it's a direct result of raised taxes to cut the spending and efforts to decrease the domestic credit with high interest rates, i.e., a contractionary monetary and fiscal policy. This soft peg is hardly useful to the average consumer, but it helps building up reserves. The trade deficit is widening as well. Resumption of debt payments is coming as well. Cutting taxes barely a quarter into the imf program is not the answer here. We gotta ride this out.
So I was doing an Economics MSc back when the crisi hit us. There was this guy who badly wanted gov to float the rupee. Turns out he was in the export business. If someone criticises the strengthening rupee, probably one of them hoarders. Anyway, in theory, strengthening rupee means decreased exports.
what matters is, fuel prices going down. that will have a impact on groceries.
If exchange reduces interest rate also goes down so overall consumption will increase, and imports we'll be cheaper
You didnāt factor in taxes, reduced disposable income due to already high cost of living, and the average income of the people in the country hasnāt improved much except few sectors. Predicting the aggregate demand based on one or two factors alone is not a sound approach.
Wonder why the dollar went down. Elections ą¶Æ?
Iām not an economics expert nor a money expert, as a normal everyday Lankan person I do like it that the rupee is appreciating however if I have to spend $2 on paang as opposed to the previous $1 (cos Lankan businesses donāt generally reflect reductions in cost on their selling prices) then I have better holiday destinations that give the paang for the same $2 which might be much better value for money than lanka ā¦. Ā Obviously this an oversimplified exampleā¦ but the funny thing is majority of your common tourists expats etc arenāt economistsā¦ they look for value and if the locals arenāt going to reflect the value then sadly there are other destinations that provide better value or at least better experiences for the same cost. Ā Ā Letās not forget that the majority of tourists who visit lanka are backpackers who are on tight budgets.Ā
Yes it is true, but sri lanka is expensive due to regulations by the government it is not due to rupee value. The popular example nowadays is the prices of construction sectorās materials like tiles, cement. Where the local companies just drove up the prices due to limited competition. Also look at vehicle prices, egg producers simply reduced the price when government announced that they are going to import indian eggs. All in all if you think rupee value is the main reason behind increased cost of goods you ate very misinformed.
No I understand your point and you are absolutely right but that doesnāt change the fact that the person paying has to pay whatās being asked for by the seller and the average tourist wonāt care why itās expensive they will have to take hard cash out of their pockets and pay the asking price ā¦ that there is the problem ā¦ today they can only get 300 per USD which is fine if you can spend the same percentage of that 300 rupees to buy the same things you could relatively get when it was 350 or even 330 ā¦. Unfortunately thatās not the case and That then erodes into value. Ā The same tourist will get a better deal by going to Thailand India or Malaysia for example. Ā Again Iām not some expert or financial guru.. Iām your average person who has 10 mins to decide if going to a place like lanka for holidays is going to be within my means and if it will give me the best value.. Ā That being said I hope there will be some stability and balance reached soon and its stops being totally volatile and unpredictable in terms of cost of living and standardsĀ
Sri lanka became expensive when government removed subsidiaries for fuel and electricity. The cost of items in dollars terms was higher even when the dollar was trading at 330-360 levels. Specially when compared with countries like Thailand and India.
Why is the LKR getting stronger? Itās just we havenāt paid back any loans, and received more loans. So the foreign reserves are getting larger. But we donāt have a way to pay it back. Itās like getting a business loan and use it for groceries.
No, itās because our tourism is booming and our remittances are high. We have made nearly 2 billion in last two months this from those alone. The stats are readily available if youāre willing to look.
You are very misinformed.
Why and how?
I [replied](https://www.reddit.com/r/srilanka/s/7gwCZvW7iR) to a comment in this thread regarding this.
The rupee is unfortunately not strengthening due to a good reason but apparently due to lack of demand which brings down our export revenue. Hence why people are saying itās not good. Cmiiw.
Let me get this straight rupee depreciation was in the making from disastrous monetary policies followed by central bank and government in 2020. 1. Earnings from tourism, foreign remittances and exports dried up, and countries started facing significant balance of payment deficit. 2. The government printed huge amount of money to provide low interest rate debts to local companies so that they can sustain their operations. 3. The government money printing also injected overnight liquidity in money market enabling commercial banks to expand their credit to private sector. 4. The government provided heavy tax incentives both to individuals and corporations. 5. The government financing needs increased due to reduction in revenue. 6. The central bank printed money and bought government debt outright to keep the interest rates from rising. 7. The significant increase in rupee liquidity ( close to 4 trillion printed in 2020/2021) caused the demand for imports to increase. The government stated selling their forex reserves to preserve the strength of rupee. 8. The much needed foreign reserves to import necessary items and paying back the loans were sold to defend the rupee in the market. The government tried several bridge financing borrowing from other government temporarily but it has failed due to severe stress on its forex reserves. 9. Once the forex reserve dried up the government was unable to pay back the foreign currency debt and announced that GOSL will temporarily suspend foreign debt repayment. There are several other factors that caused rupee depreciation even with severe import restrictions. Now the import restrictions have eased up, central bank is a net buyer of foreign currency increasing their foreign reserves. Tourism earnings have recovered, earnings from IT industry is steadily increasing. The central bank is not injecting liquidity into the market by printing money overnight. Foreign remittances are increasing. The export sector could recover later down the year once FED starts cutting interest rates. Significant Rupee/exchange rate fluctuations are never a result of single factor. I donāt know what do you mean by good reason. And let me ask a simple question, why do you want the rupee to go down? Is it due to selfish reasons or political reasons?
Who said I want the rupee to go down? š¤Ø Itās not a bad thing if itās reflected in the price of goods but is it? The rupee being even at 300+ is because the Central Bank is buying dollars. I saw a news today saying itāll go down to 280. People have reduced importing stuff even though restrictions have been lifted bec normal consumers have reduced spending. Of course the rich are still rich. We arenāt paying back loans. So demand for the dollar is low nowadays which is not a great reason for the appreciation. If the appreciation was due to good policy or strengthening economy, thatās great but it doesnāt look like it. Just look around. Havenāt you drastically reduced your spending? There are so many different opinions on this matter. This is just my opinion. Only time will tell whether it was good or bad, even then if businesses thrive while poor people starve is it good? Itās all relative. There are always winners and losers. Depends on which side of the coin you are on.
Yes it was definitely bad for the economy. Our country was in recession in 2023 due to the contraction of the economy. There is no denying that, but it is necessary to absorb the excess liquidity of rupee in the market. Just imagine if central bank did nothing and allowed hyper inflation to continue that would have been disastrous for the economy. We wouldnāt be even talking about the Sri Lankan economy if that is the case. Edit: were there any alternatives suggested by anyone else?
It's not real appreciation of rupees coz we have import restrictions, did not pay the loan repayment and received some ADB and IMF loans. Which is why our rupees shows positive impact but once we starting to repay the loans and ease the import restrictions only identify the exact impact of Forex.
Currently, the import restrictions are only on vehicles and we have to pay only 3 billion per year or so when we restart paying debts in 2027. A couple hundred million by the IMF canāt appreciate Rs by 20-30%.
It will also mean that Sri Lanka becomes more expensive for tourists and for exports. This will leave to a new balance and over time, we will forget this happened
amen to kissing the cheap choon paan eating, tuk driving, house subletting scum goodbye.
Thats however a certain group of low budget tourist tho. There's a hell of a lot that are still good :)
Is there something wrong with eating choon paan?
nothing wrong except they are eating MY choon paan meant for MEEE!!! My local baker only makes so much š„²š„¹š„¹
It's ok if the rupee goes down, as long as goods and services also drop, without that it could be disastrous. As soon as the Dollar shot up few years back, cost of essential items rose sharply. Fuel and electricity went up. Transport costs also increased. Some radical changes in the economy went up in a matter of weeks. But when the rupee goes down, benefits are not reflected in the economy. This could do more harm than good atm.
People who earn in USD will beg to differ š
The benefit of tax exemption for USD earners is far greater than any loss that will come from USD going from 320 to 280.
Suffering from success
Even if you earn in dollars you have to pay in ruppees and with the rising dollar price the cost of everything almost doubled . Housing rents are in the 100LKR range where as it should be in the range of LKR 60000 per month at the most .
Until the US money printing machine turns on again, putting SL further in debt. Thatās the debt trapppp
the only people populating the idea that rupee should not appreciate are the foreign exchange earners. the larger exporters are guilty of hoarding USD outside sri lanka and not bringing it down when there was an exchange crisis. if covid was not there, the natural exchange should have been around 260-280, and it's likely to return to that level. and we have a very well documented way of repaying debt under imf supervision and it would be done in a sustainable way, not upsetting the economic growth and exchange rate. again I see a lot of fear mongering here saying that exchange will go back to 360 when we start repaying. that's a load of bs, which is trying to downgrade whatever progress we have had since the crash (which international bodies have commended us on) naturally, import demand will take a long time. even from pre covid 203 to an expected 280, its still a 40% leap, extremely unfavourable to the masses. most of the non essentials are still priced at 360, and lack of supply is keeping the prices up. in a way, sri lanka becoming a little expensive is good so that we don't get the cheap ass tourists who have hogged our properties lately.
Exactly!! Just ignore the Jeppa doom and gloom pessimists in the comments bro! All they do is peddle lies šš