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‘Flexible exchange rate’ negates vehicle import relaxation
ECONOMYNEXT –Sri Lanka cannot relax an import ban on vehicles, State Minister of Finance Ranjith Siyambalapitiya said, after the rupee fell steeply from around 191 to 220 level due to the operation of an inconsistent peg with one sided buying.
The flexible exchange rate, concocted by Western mercantilists and peddled to countries without a doctrinal foundation in sound money, which is neither a clean float nor hard peg, critics have said.Under IMF programs in particular, central banks which had busted up reserves by mis-targeting rates are encouraged to buy dollars (creating new money) but not to sell.
As a result, there is no mechanism to match timing differences between inflows and domestic credit, other than the net open position of banks.Third world monetarily unstable central banks also limit NOPs.In this instance the rupee was appreciating steeply in the days before, amid generally good monetary policy by the central bank in the past two months, which discourages plus positions.
If the central bank does not sell back some of the dollars it bought, liquidity is not tightened; there could be a short-term mismatch, or an exchange policy error. In May the central bank had bought 662.5 million US dollars.Under the flexible exchange rate, interventions are delayed, triggering a sudden shift from a peg to a floating regime until the market is in full panic mode with importers scrambling to cover, which is defined as ‘excessive volatility’.
There was a 70 to 80 million US dollar oil bill and the central bank had bought dollars, Siyambalapitiya said.As the rupee weakened other parties had also bought dollars, fearing a further weakening. This is normal, he claimed.
“If an allocation for oil for 70-80 million dollars created affected the value of the rupee in this manner, items like vehicles, which require more dollars, have to be considered very carefully,” Siyambalapitya said in the statement.
“Therefore, we cannot give permission to import cars now.”
The central bank eventually intervened in the market and several banks gave the dollars to the bank concerned to cover the import bill.Critics say the ad hoc flexible exchange rate, coupled with flexible inflation targeting is perhaps one of the deadliest monetary regimes ever devised.
Under the regime, interest rates are cut as soon as inflation comes down from the previous crises.Inflation nears zero about 12 to 18 months after rates are hiked to correct reserve losses, just as domestic credit starts to pick up.
Analysts have warned that an IMF, net international reserve target (requiring pegging and exchange policy) and a monetary policy consultation clause (which require floating and monetary policy only) are in fundamental conflict.
When rates are cut, and if they are enforced with overnight or term reverse repo injections, the currency slides again, and monetary policy errors are compensated with depreciation, resulting in public discontent, mass rejection of free markets, a failed reform agenda, and the ouster of (usually) reformist leaders.
While short term exchange policy errors can be corrected with interventions, monetary policy errors cannot be corrected by interventions which are sterilized with new money to maintain the fixed policy rate, analysts say.In the case of a country that restructured debt, the money and exchange policy conflicts may lead to a second default.
A ‘flexible exchange rate episode in March 2020 led to a loss of market access, earlier they have led to downgrades.In order to continue mis-targeting rates and avoid correcting them, economic bureaucrats persuade politicians to impose exchange and import controls, analysts say. The current Import and Export Control Law was brought in 1969 in the wake of two back to back IMF programs.
A commemorative service was held in memory of Rasaiah Parthipan commonly known by the nom de guerre ‘Thileepan’ in Nallur Jaffna this morning (26).
Parthipan a revolutionary member of the LTTE and a student of the University of Jaffna, commenced a hunger strike on 15th September 1987 untill his death on 26th September 1987. He was 23 years old at the time of his demise.
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Landslide Early Warnings issued to the districts of Colombo, Galle, Gampaha, Hambanthota, Kalutara, Kandy, Kegalle, Kurunegala, Matara, Nuwara Eliya and Ratnapura
The National Building Research Institute has issued landslide early warnings to the districts of Colombo, Galle, Gampaha, Hambanthota, Kalutara, Kandy, Kegalle, Kurunegala, Matara, Nuwara Eliya and Ratnapura from 16:00 hrs on 25.09.2026 To 16:00 hrs on 26.09.2026
Accordingly,
LEVEL III [RED] landslide early warnings have been issued to the Divisional Secretaries Divisions and surrounding areas of Neluwa, Nagoda, Niyagama and Thawalama inthe Galle district, Ganga Ihala Korale, Udapalatha, Doluwa and Pasbage Korale in the Kandy district, and Kothmale West, Ambagamuwa, Kotmale East and Norwood in the Nuwara Eliya district.
LEVEL II [AMBER] landslide early warnings have been issued to the Divisional Secretaries Divisions and surrounding areas of Elpitiya, Baddegama and Karandeniya in the Galle district, Walallawita in the Kalutara district, Deltota, Udunuwara, Gangawata Korale, Yatinuwara and Panvila in the Kandy district, Aranayake, Dehiowita, Mawanella, Deraniyagala and Yatiyanthota in the Kegalle district, Thalawakelle in the Nuwara Eliya district and Ratnapura and Pelmadulla in the Ratnapura district.
LEVEL I [YELLOW] landslide early warnings have been issued to the Divisional Secretaries Divisions and surrounding areas of Seethawaka and Padukka in the Colombo district, Attanagalla and Mirigama in the Gampaha district, Katuwana and Walasmulla in the Hambanthota district, Ingiriya and Bulathsinhala in the Kalutara district, Hatharaliyadda, Poojapitiya, Medadumbara, Kundasale, Ududumbara, Thumpane, Akurana, Pathadumbara, Harispattuwa and Pathahewaheta in the Kandy district, Warakapola, Bulathkohupitiya, Galigamuwa, Kegalle and Ruwanwella in the Kegalle district, Mallawapitiya, Alawwa, Polgahawela and Mawathagama in the Kegalle district, Pitabeddara, Kotapola and Pasgoda in the Matara district, Nuwara Eliya in the Nuwara Eliya district and Elapatha, Ayagama, Nivithigala, Kuruwita and Kalawana in the Ratnapura district
Parliament yesterday passed the Twenty-Second Amendment to the Constitution Bill and the Judicature (Amendment) Bill with two-thirds majorities, with 158 MPs voting in favour and 63 against each Bill.
The Illankai Tamil Arasu Kadchi (ITAK) and Sri Lanka Muslim Congress (SLMC) voted with the SJB against the Bills.
NDF MPs Ravi Karunanayake and Faizer Musthapha and SJB Badulla District MP Nayana Wasalathilaka were not present when the votes were taken.
The final vote on the Judicature (Amendment) Bill was announced at around 8.08 p.m. after Opposition MPs called for divisions on its clauses during the Committee Stage.
The votes followed a two-day debate which commenced on Thursday (24), after Justice and National Integration Minister Harshana Nanayakkara presented the Bills for their Second Reading.
The Supreme Court’s determination on the Bills was presented to Parliament on Tuesday (22) by Speaker Dr Jagath Wickramaratne. The Court determined that the 22nd Amendment Bill did not require approval at a referendum and could be passed by a special two-thirds majority in Parliament.
The amendment provides for raising the mandatory retirement age of Supreme Court judges from 65 to 67 and that of Court of Appeal judges from 63 to 65. It also provides for the Chief Justice to retire at 67 or after completing six years in office, whichever comes earlier.
The Speaker informed Parliament that the Judicature (Amendment) Bill could be passed by a simple majority.
The SJB opposed the legislation and its MPs attended Parliament dressed in black yesterday. The party also staged a protest at Polduwa Junction, Battaramulla, under the theme “No to 22, which destroys democracy”, with Opposition Leader Sajith Premadasa and several SJB politicians participating.
Thileepan rembered on 39th death anniversary
Landslide Early Warnings issued to the districts of Colombo, Galle, Gampaha, Hambanthota, Kalutara, Kandy, Kegalle, Kurunegala, Matara, Nuwara Eliya and Ratnapura
Showers in the Western, Uva and Sabaragamuwa provinces and in Galle, Matara, Kandy, Nuwara-Eliya, Batticaloa and Ampara districts.
22A, Judicature Amendment Bills passed with 2/3 majority
TIN mandatory for key transactions from Nov. 1
Navy brings 25 Indonesian fishermen ashore after trawler capsizes
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