Sri Lanka's forex crisis bodes ill for tottering economy

A t 11.20 a.m. on March 30, as the Chennai -Colombo SriLankan Airlines flight began its descent in Colombo, an announcement over the aircraft’s public address system gave out the usual instructions laced with pleasantries, welcoming all passengers to the Bandaranaike International Airport. Use only banks or authorised foreign exchange dealers appointed by the Central Bank of Sri Lanka to change your currency.” Then came the threat : “If you change your foreign currency with unauthorised agents, you may be involving yourself in criminal activities.” The reason for this warning and threat, in a country with a draconian Prevention of Terrorism Act with wide powers to incarcerate anyone without any reason assigned, was not hard to find. On March 31, he tweeted: “The suspension of the money changing license of the first errant money changer has just been announced by the CBSL.” A CBSL press release issued the same day read out the riot act to money changers: “The Central Bank has intensified its on-site investigations at Authorised Money Changing outlets and will stand ready to suspend/revoke permits of Authorised Money Changers who do not adhere to the Directions issued under the Foreign Exchange Act.” Cabraal does not appear to realise what the problem is. A few days later, the businessman received a call from the bank informing him that his turn for accessing foreign exchange had come and that he would have to pay an additional LKR 10 lakh because the value of the Sri Lankan rupee had dropped. For instance, one government official said that the government’s overdraft with just one bank, the Bank of Ceylon, is “in the range of 500 billion” LKR.