Central bank control over the exchange rate impedes the import of necessities and raises the cost of living

Sri Lankan economy had to face several crises with the beginning of the Covid expansion; the major crisis was the lack of foreign exchange. The main reasons for this were disruption of the tourist industry, decreased foreign investment, reduced remittances sent to Sri Lanka by migrant workers, etc. This was also due to the significant drop in the country’s foreign reserves with the payments of foreign loan instalments and interest payments for this year. At the same time, the rupee’s value also depreciated, and a dollar is worth Rs. 201.00 today. Using legal powers, the Central bank is maintaining the value of a dollar at this level. For this, they can give orders to commercial banks, also, the Central Bank has introduced special rules for importers, exporters, and investors to reduce the impact on the exchange rate due to them. Restrictions on the issuance of latter of credits through commercial banks, rules to accelerate the conversion of dollar receipts into rupees, etc., were some of the methods they followed. However, due to these processes, recently, numerous problems have been created in the country, due to the shortage of imported essentials such as gas, crude oil, sugar, milk powder; building materials, etc., there were queues to buy them. As a result, the cost of living and inflation is rising sharply. Due to the existing restrictions, importers cannot unload their goods from the port, and the goods are heaped up there.
Source-A24 News

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