Sri Lanka - Money

With the liberalization of the foreign exchange rate regime in 1977, which changed from a fixed exchange rate regime to a flexible one, the value of the Sri Lankan currency has continued to fall against major currencies. The Sri Lanka rupee (R) which was 16.5 per U.S. dollar

in 1980 fell to R40 per dollar by 1990, and collapsed to R85 in 2001. With the high dependence on imports, the falling value of the currency means that the prices of imports continue to rise, pushing up domestic inflation.

Sri Lanka has an active stock market, the Colombo Stock Exchange (CSE), the origin of which dates back to the 19th century. Share trading in Sri Lanka began in 1886 when the Colombo Brokers Association commenced the trading of shares in limited liability companies. Share trading grew since then and Colombo had a very active share market throughout the 20th century except during the 1960s and 1970s where a spate of nationalization, including the insurance companies and plantations, effectively reduced the trading to insignificant proportions. This decline was short lived, and the stock market recovered quickly following the policy reforms introduced in the latter part of 1970s, which created free and open market ideals where the private sector was given the key role in economic activities. Today the exchange has 238 companies listed with a market capitalization of approximately 10 percent of gross domestic product.