June, 18, 2018
Sri Lankan Rupee reported another record low at selling rate of Rs. 161 against the US Dollar, making the Rupee depreciating against US Dollar at over 21% from the December 2014 levels.
Central Bank announced average telegraphic transfer rates quoted by Colombo based Commercial banks as at 9:30 a.m today (18) reported as selling rate of a US Dollar at Rs. 161.0082 per US Dollar (US $).
Although some authorities have been quoting that dollar appreciation against Sri Lankan Rupee has no effect on the economy, the recent trends outline that Sri Lankan Rupee had depreciated average by over 6% every year from 2014 December levels of Rs. 133 per US Dollar, amidst Sri Lanka’s foreign debt predicted go up by a US $ 3.8 billion according to analysis by US State Department as per report published on internationally famous Global Finance Magazine.
According to international economists, a devaluation means there is a fall in the value of a currency of a country, meaning Sri Lankan Rupee is worth less compared to other foreign currencies, especially the US Dollar.
International Economists over the centuries have outlined that ‘Effects of a devaluation’ include Cheaper Exports, making a currency's devaluation or the exchange rate resulting in more competitive exports since it appear cheaper to foreigners in global marketplace, whilst it further make country’s real estate properties appear cheaper to foreigners.
However economists outline that a devaluation of a currency will also make Imports more expensive making imports, such as fuel or petrol, food and raw materials more expensive, whilst a country like Sri Lanka continue to be largely an imports dependent economy. A devaluation could cause Inflation to occur whilst it may also lead to push up wages to keep labour, and according to economists in a period of stagnant wage growth, devaluation of a currency can cause a fall in real wages, since devaluation causes inflation. And if the inflation rate is higher than wage increases, then real wages will fall as a result.
- Reporting by Devendra Francis