Since Oct 1980 the Lanka Rupee was allowed to float against the US$. If you use the period since 1982 you get a annual depreciation of 7.16% and 8.55% if you use the period since August 1994 when the present government came into office. Annual estimates from 1995 to 2003 are
The projection is a linear through the last 20-years daily averages. Note that the depreciation of the "Real value" of the rupee needs to also include depreciation of the US$. The US consumer price index over the same period since 1982 rose linearly at 3.56%. So the real value of the Lanka rupee is dropping by a factor of 10 every 22.8 years. i.e. SLRs 10 in 1980 is the same as SLRs 100/- today. In contrast the US$ takes 65.8 years to drop by factor of 10 in real value.
On 2000, June 20 the US$ Selling rate of the Central Bank of Sri Lanka increased by 5.75% leading to an overnight depreciation of the LKR by about the trend for 10 months. On 2001 January 23rd the Central Bank allowed the rupee to free float rates leading to another 6.62% overnight depreciation of the LKR giving a nearly 25% depreciation from the same day in 2000.
If the average long term trend continues as we could expect the US$ would equal 100 rupees in the middle of 2004 as it did. The rate of increase since Nov 2003 has been 6.6% which is close to the long term trend. If the short trend in 2000-2001 had continued it would have been close to end of 2002. With the free float anything is possible ..., It has clearly remained at a much slower rate of growth since the general elections in 2001 December and has returned to the long term trend, and now depreciating as expected.
These exchange rates are the the middle rate. When you exchange $ to LKR at the bank or ATM you get 1% less. When you buy $ with LKR you pay 1% more. When you charge to VISA/MC you pay 3% more in addition to the 2-3% that some companies in Lanka add for using credit cards. i.e. you pay 5% over cashing the money from ATM from your bank and paying cash.
The 3-percent increase in value of the LKR against the US$ in 2003 Sept reflecting a depreciation of the US$ rather than an appreciation of the LKRs, lasted only 2-months.
The rate reported on CBSL webpage for 2000 Jan 25th is Rs 94.85, but large fluctuation on that day made it climb briefly above Rs 100/-. On Feb 20th rate was down at 85.40 and started to climb on on the projection of the trend seen in 2000.
It is interesting that rapid changes in the exchange rate; 24% in 1966; 88% in 1977; 10% in 1989 and 14% in 2000 seem to happen every 11 years. Now why is this exchange rate related to maximum in sun spot activity. :-)
Because of the annual 7% depreciation of the Lankan Rupee, the One, Two, Five, and Ten cent coins with 0.7 0.8 1.0 and 1.3 grams of aluminum have more metal value (US$1.50 per kilogram) than legal tender since about 1995. They are not seen in circulation in Lanka and rarely issued now by Central Bank except on special request because of the much higher cost of production. The Central Bank is requesting return of coins in piggy banks ;-)
The volume of currency notes and coins by end 2001 stood at Rs. 76.5 billion (US$821M) against Rs. 73.3 billion (US$888M) by end 2000 with notes in circulation representing 96 percent of the total currency in use.
It maybe even time now to get rid of all cents coins. Ceylon demonetized the quarter cent in 1910 and the half cent in 1941 when they were in real value, worth more than the rupee today.
For more information about Lankan Coins visit LakdivaCoins collection website.
Notes: Some of the spikes in the graph I suspect are typos in the FRB database.
This graph is updated only every few months.
Url with values since the graph above updated daily by cron.
LKR/USD Rate Today from OANDA.
Daily Commercial Bank Exchange Rates Central Bank of Sri Lanka.
This document was first posted over 5 years ago in 1998 September.
A few older archived versions of the text can be read on the Wayback Machine which is a 120 TeraByte archive of the Internet from 1996-2001. It posts archived pages more than 6-months old, and has saved a limited number of images from only the higher-level webpages.
Kavan Ratnatunga 2004 September 30th