Currency depreciation – Whose fault is it?

Currency depreciation is one of the most talked about topics these days and a convenient one to throw a few darts at the government.

Currency depreciation means the particular currency is going up in price, meaning more currency has to be paid for the good that was previously priced lower. This means that the currency is going down in value.

When I was a little boy, an American dollar fetched only Rs.4. Now I am in my 70s and the price of a dollar is around Rs.180. Who is the cause of this? Not the ‘Yahapalanaya’ government, of course!! We, ourselves, have caused it.

Fuel and wheat flour have to be imported: there are no alternatives. The demand for both keeps the exchange rate high.

Each time a new government comes to power, there is much talk about oil exploration in the Manner basin. It started during Sirimavo’s days. Still no oil has been found, which keeps the demand for oil high.

There was a talk about bread being made out of red rice flour to relieve our dependency on foreign flour. Still I have got to see the colour of bread made out of red rice flour. An extensive use of red rice flour could relieve us of our dependency on white flour and relieve us of our dependency on flour imports.

Because the local demand for fuel and white flour is high, with the supply being constant, a rise in demand increases the dollar rate, which means the rupee is depreciating (going up in price); it is not the fault of the ‘Yahapalanaya’ government. It is really our fault.

We wouldn’t like to buy anything made locally. If the foreign good is available, people make a beeline for it. This demand keeps the price of the rupee high.

Before the war, sarees were made in Chankanai (Northern Province) and trouser lengths in Pandatheruppu (Northern Province). These were of high standard equalling the foreign goods. If these factories had developed, we wouldn’t have been so dependent on foreign textiles. After the war, I am not sure whether the factories are functioning.

If some kind of import control is imposed on the non-essential items, there wouldn’t be that pressure on the rupee.

There is no need to import blueberries and salmon, when our country has an abundance of tropical fruits and fish of all varieties, our country being surrounded by the sea. There is no need to import salmon or canned fish. Our ‘hal masso’ is just as good, if not better. Don’t you think so?

While blaming the government for everything, you must be thankful if you get a cash gift from abroad – like US $ 100.

That amount would fetch much more when there is currency depreciation. If the rupee had depreciated to Rs.180, the dollar gift would fetch you 100x180 = Rs.18,000.

The same argument would apply to worker remittances, which have nothing to do with you but strengthen the balance of payments, denoting income from abroad. So, don’t curse the government, if the rupee depreciates. The country could gain as well.

When the rupee depreciates, other imports would go up in price unlike devaluation, which is caused by governmental action; depreciation takes place naturally. So, you don’t have to blame the government.

If you are dependent on Maldive fish, the price you pay would go up but if blueberries go up, you don’t have to grumble. Our local fruits are as good. Are you aware that tourists go crazy over our pineapple slices and jakfruits? Those fruits won’t go up in price because they are not imported but grown locally.

Conversely, our exports would become cheaper and therefore more competitive.

So, next time the rupee depreciates, do not think it is a weakness of the part of the government. You should understand whose weakness it is!