Rupee to float?

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Central Bank Sri Lanka

There is wide speculation that Rupee is to float soon. The Central Bank of Sri Lanka has been dilly-dallying on a decision on allowing the rupee to float for some time.

Currently, the official rate stands at 203 rupees per dollar while the black market is over 240 while still, dollars are in short supply.

There are predictions that the black-market rate will reach the 300 mark in no time if things are not managed and on the other hand, if the rupee is allowed to float in the short term the dollar may reach the 300 rupee mark but may stabilize after a while.

Holding on to artificial foreign exchange rates will only help the black marketers.

Its high time the Central bank understood the basics of supply and demand said a financial analyst.

Floodgate
Prof. Sirimevan Colombage previously said that controlling the exchange rate is a mistake that the CBSL has been making for a long time.

“The CBSL adopted this control method for the past two years. When you hold the exchange rate for a long time and you release it after that, it is like opening a floodgate,”

Now it seems the flood gate effect will be witnessed due to the delay in allowing the rupee to float however now it seems that there is no other alternative as there is a real possibility of the economy collapsing due to artificially maintained exchange rates.

Professor Colambage and others have said that a partial float of the rupee is among the available options.

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