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Currencies
SRI LANKAN RUPEE
Introduction | Overview | Structure | History | Factors affecting change in exchange rates | Daily trend of Sri Lankan rupee | Weekly trend of Sri Lankan rupee
Introduction


Rupee is the ancient Asian currency unit of exchange that still provides with official currencies of seven Asian nations namely India, Pakistan, Sri Lanka, Indonesia, Nepal, Bhutan and Maldives, and two African countries that are Mauritius and Seychelles. All these currencies are symbolized as common symbol i.e. “Rs” and “” though the subunits of different rupee currencies may vary. The rupee currency in Sri Lanka is known as Sri Lankan rupee and is counted among the only three rupee currencies that use “cent” as their subunit.

The currency is written in the national language i.e. Tamil as “ரூபாய” and in addition to the common symbols also depicted as “Rp” or “SLRp” for disambiguation. Sri Lankan rupee has been in existence since 1870 but was recognized as an independent currency in 1941. According to the ISO 4217 regulation, the currency code for Sri Lankan rupee is LKR and the currency code is 144.

Overview


Sri Lanka, in the recent years, has encountered with strong growth rates and is one of the expeditiously improving economies of the world. No doubt, the development process in the country was lagging behind in the past due to political instability and the civil war that continued for 20 long years. From 1977 on, the country started to divert from its socialist outlook and followed the policy of liberalization and even currently, it has been opening and privatizing its economy. Sri Lanka is characterised as an economy largely dependent on domestic trade and facing the lack of foreign direct investment. The popular garment sector of Sri Lanka is certainly one of the biggest in the world and is a substantial source of revenue to the government. The low value of currency supports the export competitiveness of the country and helps the country gain edge over competitors.

Sri Lankan rupee was pegged to the US dollar since it was launched but recently in the year 2003, the currency was floated in the world market, reason being the poor perfomance of the economy off lately. Though, this step didn’t prove the right one initially as the value of Sri Lankan rupee dipped soon after that but within a couple of years, it got its much needed stabilty and is still maintaing it. The import-export restriction suggest that the local currency can be imported or exported for the amounts not exceeding 1000 Sri Lankan rupees. In context of foreign currency import-export, the amounts with the value above US$ 10000 need a declaration to get transferred.

Structure


Sri Lankan rupee is one of the only three rupee currencies that use “cent” as its subunit, though “cent” is a popular subunit of dollar currencies. It divides one unit of the currency in 100 equal parts. More denominations in the currency are issued in the form of paper notes as compared to the coinage i.e. banknotes are issued in 7 face values and coins are issued in 5 face values. The banknotes of Sri Lankan rupee have got distinctive pattern of design on its reverse side from currency notes of most of the world currencies, the difference being that these notes are printed vertically. The banknotes of Sri Lanka have seen a lot many changes in context of design and pattern since they first started to get produced. The design of the current banknote series in circulation is based on the theme “Sri Lanka Heritage” and the images on the notes give a colorful expression of culture and practices in Sri Lanka.

The face values in which the notes are printed include 10, 20, 50, 100, 500, 1000 and 2000 rupees. As most of the currencies, the banknotes of Sri Lankan rupee follow different color pattern for each note so that differentiation among them can done with ease. The 10 rupees note has green, 20 rupees note has purple, 50 rupees has blue and 100 rupees note has orange colored scheme. The 500 rupees has a combination of light orange and purple colors, the 1000 rupees note appears light green and the newly issued 2000 rupees note has orange as its main color. The details of the images on the banknotes are mentioned in the following

  • 10 rupees note – A Sinhalese Chinze on the front and flowers of the backside of the note

  • 20 rupees note - Image of a native bird mask on the obverse and fishermen on the reverse of the note
  • 50 rupees note – A man wearing a hat of ceremony is depicted on the front side and a decorated sword is highlighted on the reverse
  • 100 rupees note – The obverse side of the note has a picture of a large decorated earthenware jar and the backside shows two parrots with women collecting sheets of tea in the background
  • 500 rupees note – Front side of the note possesses image depicting dancers and musicians and on the backside, a kingfisher bird is highlighted with flowers
  • 1000 rupees note – A decorated elephant with its mahout on the obverse and picture of peacocks on the reverse
  • 2000 rupees note – The fortress of Sigiriya on an ancient cliff is shown on the front side of the note and a woman with flowers is picturized on the reverse.

The coins in Sri Lankan rupee are minted in 5 face values namely 25 and 50 cents, 1 rupee, 2 and 5 rupees. Coins in denominations lower than that of 25 cents are also circulation but neither they are minted now nor they are seen frequently. These 5 coins have got the Armorial Ensign of Sri Lanka embossed on their obverse side and their face values along with country’s name and the year of minting on the reverse side. The dimension, weight and thickness of the coins increase depending the value the coin is possessing. This pattern of design has been followed since the issue in 1963. Also, there’s a long list of commemorative coins that had been issued since the country got independent. Currency management in Sri Lanka is a function of the reserve bank of the country named Central Bank of Sri Lanka that came into existence in 1950. The bank doesn’t produce the currency currently instead it gets the banknotes printed and the coins minted from De la Rue Lanka Currency and Securities Print (Pvt) Ltd and Royal Mint of United Kingdom respectively.

History


The history of currency in Sri Lanka formerly called Ceylon dates back to 1st century BC when silver coin punch marked from India use to circulate in the country. Also, copper coins were minted locally during this time. With time, coinage from other countries especially Roman coins started getting imported on the island and were used as a medium of exchange along with other coins. In the beginning of the 11th century, gold also started to get used as a material to mint coins and the designs of these gold coins were taken from the South Indian coinage. The currency in Ceylon continued to circulate in the form these copper, silver and gold coins until in the 15th century when due to the European initiation of voyages to discover new lands, Portuguese landed in Ceylon for the first time.

The European natives got the permission to construct their fort in Sri Lanka and in few years’ time, they took control over the island. The Portuguese used their own coins instead of the local coins and from 1640; they started minting “real” coins in Colombo. This scenario continued for 9 years and after that, Goa in India was made the minting center of Portuguese coins to be used in Sri Lanka. Indian coins were also used as a medium of exchange in Ceylon during this time. In the year 1658, the Dutch displaced the Portuguese from Sri Lanka and the island came under the control of Dutch East India Company. The company marked the already existing coins under its name and imported coins from Indonesia and Netherlands. In 1660, Dutch East India Company began minting copper coins and in 1784, silver rupees. The official unit of account was changed to Dutch rixdoller that circulated in Sri Lanka along with Indian rupee. The island came under British control in 1828 who changed the official unit of currency to British pound.

Rupee as the national currency unit of Ceylon was introduced 1870 at par with the Indian rupee and replaced the British currency unit @ 1 Sri Lankan rupee = 2 shillings and 3 pence. The currency was a decimalized one and “cent” served as the subdivision breaking it into 100 equal cents. From the year 1885, rupee banknotes started getting printed by the currency board of the Government of Ceylon. The Ceylonese rupee was linked to the Indian rupee all that time and it got separated in 1941, although its value was still equal to the Indian rupee. The island gained its independence in 1948 and a couple of years later in 1950, the currency board that issued the currency was replaced by the Central Bank of Ceylon. The country got its renaming done in 1972 and was called Sri Lanka and thus the national currency that was Ceylon rupee was also renamed as Sri Lankan rupee.

Factors affecting the exchange rates between two countries


The volatility in the foreign exchange rates depends upon a numerous macro economic factors that have different degrees of importance to different economies of the world. Some special and exceptional factors affecting the rates may also exist in the case of different countries. Following are shown the common factors on which the foreign exchange rate depends

  • Flow of imports and exports between the countries
  • Flow of capital between the countries
  • Relative inflation rates
  • Fluctuation limits on exchange rate imposed by the governments of the countries
  • Merchandise trade balance
  • Rate of inflation in the country
  • Flow of funds between the countries for the payment of stock and bond purchases
  • Relative growth
  • Short term and long term interest rate differentials
  • Cost of borrowings
 
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