Wednesday, June 19, 2024

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Finance minister talks of dollar float while former CB Chief explains rupee float

Sri Lanka Finance Minister Ali Sabri in an interview with Bloomberg on the sidelines of IMF spring meetings in Washington on Thursday noted that “We have floated the dollar creating depreciation of their currency”, raising eyebrows of local economic experts and citizens

He said “We have floated the dollar as a result of which Sri Lankans have seen depreciation for about 60% to 70% of their currency”

.”We are working with the multilateral and all the other institutions and think tanks to see how do we achieve this,” he added.

Moreover, he stated that Sri Lanka is also in the process of tax reformation in a properly sequenced manner in consideration of the pressure which Sri Lankans are under due to the depreciation.

Several eminet economists noted that the million dollar question is as to how the Sri Lankan Finance Minister is effecting dollar float.

If it wasa slip of the tongue then why he didn’t bother to abologise for the error and make an immidate correction during the interview , they said adding that the Sri Lanka Finance Minister’s statement has become a talk of the town.

The Finance Minister, speaking to Bloomberg stated that while the IMF program requires debt restructuring when debt is not sustainable any longer, several creditors have reached out to the country to discuss, and that Sri Lanka is in the process of appointing relevant financial and legal advisers.

Meanwhile former Central Bank Governor clearly clarified and explained the background to rupee float

Mr Cabraal in a statement yesterday said the decision to float the rupee taken by the Monetary Board chaired by him is being continued by the current Central Bank governor and Treasury secretary.

The sudden manner in which the rupee was floated on March 7 is now being criticised for the sharp depreciation of the rupee against the US dollar and the soaring prices in the economy.

The Monetary Board on March 7, 2022 decided to allow the market to have a greater flexibility in the exchange rate, with immediate effect and communicate that the Central Bank was of the view that forex transactions would take place at levels that are not more than Rs.230 per US dollar.

“From the above it will be clear that while the Monetary Board had, as a market guidance, expressed its ‘view’ as to the level at which forex transactions would take place, a clear decision had been taken to allow for the flexibility of the Sri Lankan rupee in the forex market.

It would also be noted that from April 8, 2022 onwards, the Monetary Board, under the new governor and new Treasury secretary, have continued with the above exchange rate policy, without fixing a specified exchange rate, as was the case immediately prior to March 7, 2022,” Cabraal said in a statement explaining the background to the floating decision.

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