• Education
    • Higher Education
    • Scholarships & Grants
    • Online Learning
    • School Reforms
    • Research & Innovation
  • Lifestyle
    • Travel
    • Food & Drink
    • Fashion & Beauty
    • Home & Living
    • Relationships & Family
  • Technology & Startups
    • Software & Apps
    • Startup Success Stories
    • Startups & Innovations
    • Tech Regulations
    • Venture Capital
    • Artificial Intelligence
    • Cybersecurity
    • Emerging Technologies
    • Gadgets & Devices
    • Industry Analysis
  • About us
  • Contact
  • Advertise with Us
  • Privacy & Policy
Today Headline
  • Home
  • World News
    • Us & Canada
    • Europe
    • Asia
    • Africa
    • Middle East
  • Politics
    • Elections
    • Political Parties
    • Government Policies
    • International Relations
    • Legislative News
  • Business & Finance
    • Market Trends
    • Stock Market
    • Entrepreneurship
    • Corporate News
    • Economic Policies
  • Science & Environment
    • Space Exploration
    • Climate Change
    • Wildlife & Conservation
    • Environmental Policies
    • Medical Research
  • Health
    • Public Health
    • Mental Health
    • Medical Breakthroughs
    • Fitness & Nutrition
    • Pandemic Updates
  • Sports
    • Football
    • Basketball
    • Tennis
    • Olympics
    • Motorsport
  • Entertainment
    • Movies
    • Music
    • TV & Streaming
    • Celebrity News
    • Awards & Festivals
  • Crime & Justice
    • Court Cases
    • Cybercrime
    • Policing
    • Criminal Investigations
    • Legal Reforms
No Result
View All Result
  • Home
  • World News
    • Us & Canada
    • Europe
    • Asia
    • Africa
    • Middle East
  • Politics
    • Elections
    • Political Parties
    • Government Policies
    • International Relations
    • Legislative News
  • Business & Finance
    • Market Trends
    • Stock Market
    • Entrepreneurship
    • Corporate News
    • Economic Policies
  • Science & Environment
    • Space Exploration
    • Climate Change
    • Wildlife & Conservation
    • Environmental Policies
    • Medical Research
  • Health
    • Public Health
    • Mental Health
    • Medical Breakthroughs
    • Fitness & Nutrition
    • Pandemic Updates
  • Sports
    • Football
    • Basketball
    • Tennis
    • Olympics
    • Motorsport
  • Entertainment
    • Movies
    • Music
    • TV & Streaming
    • Celebrity News
    • Awards & Festivals
  • Crime & Justice
    • Court Cases
    • Cybercrime
    • Policing
    • Criminal Investigations
    • Legal Reforms
No Result
View All Result
Today Headline
No Result
View All Result
Home Business & Finance Economic Policies

Sri Lanka offers driving license for tourists on arrival at Rs2,000 todayheadline

August 4, 2025
in Economic Policies
Reading Time: 5 mins read
A A
0
4
SHARES
8
VIEWS
Share on FacebookShare on Twitter


ECONOMYNEXT – Sri Lanka’s central bank has made 231.9 billion rupees (about 770 million dollars) worth unsterilized foreign exchange sales to the government in the first half of 2025, reducing excess liquidity in the banking system, official data shows.

From January to June 2025, the central bank had created 299.4 billion rupees with outright dollar purchases from banks (1,014 million), 2.1 billion rupees from miscellaneous injections, the central bank’s Market Operations Report said.

The central bank has also injected 109.3 billion rupees by engaging in rupee generating dollar swaps, without buying reserves outright for its own securities.

In the first six months of 2025 a total of 410.8 billion rupees of inflationary operations (that expands reserve money) has been conducted.

Liquidity had disappeared (deflated) through 6.7 billion rupees of maturing bonds, 95 billion rupees of coupons paid on government bonds (which will reduce domestic credit and prevent dollars in reserves being demanded by imports).

Currency use has also gone up by 106.4 billion rupees.

Unsterilized Sale

The central bank has sold dollars to the government for 231.9 billion rupees also reducing liquidity, in an unsterilized dollar sale.

A dollar sale by a monetary authority that does not have a policy rate, reduces liquidity and rupee reserves owned by banks in exact proportion to the outflow of dollars from reserves, automatically keeping the exchange rate and domestic credit in balance.

The reduction in liquidity leads to a tightening of liquidity (deflationary policy), which will eventually push up interbank rates, based on classical economic principles generally known as the price-specie (or reserve)-flow mechanism originally clearly explained by David Hume.

So-called currency crises are triggered by a central bank which replaces the lost liquidity through open market operations to prevent the rates from going up, rejecting classical economics.

When liquidity falls and there is tendency for the interbank market to get active, and rates to rise.

Any attempt to suppress interbank activity through a single policy rate with inflationary open open market operations will tend to reduce the ability to collect reserves and eventually lead to net forex losses or depreciation or both.

Cutting rates through ‘signalling’ can reduce reserve collections without causing forex shortages per se.
Already in 2025, the rupee has fallen despite current account surpluses indicating that the central bank was not conducting sufficient deflationary operations to match the dollars it is purchasing.

RELATED : Sri Lanka rupee depreciates amid record current account surplus : Analysis

Rejecting Classical Economics

Analysts have warned that Sri Lanka’s interest rates cannot be cut based on a claim that historical inflation was low (flexible inflation targeting) which is a spurious monetary doctrine that rejects economics.

All defaulting countries with external default without war and the IMF repeatedly have similar frameworks.

While soft pegs which sterilize forex reserve sales with new money (which has not happened up to June) to suppress market rates are fundamentally flawed, adding an inflation target makes the policy conflicts even more toxic, EN’s economic columnists Bellwether says.

That the operating framework is flawed is shown by the existence of exchange controls and the resorting to frequent trade controls.

Rates are dependent on domestic private credit developments and debt repayment requirements, which may in turn be financed by gilt sales to the market (at an appropriate rate) since the government does not have a surplus in the current account of the budget.

If the central bank does not conduct sufficient deflationary operations it will lose the ability to collect dollars and give to the government. The government then has to come up with a plant to buy its own dollars from the market with cash raised.

RELATED : Sri Lanka Treasury should buy its own dollars to settle debt and avoid second default

Attempts to control rates through open market or other operations had led to currency crises in 2012, 2016/16, 2018 and 2019/2022 without war and ultimate default, analysts have warned.

Neither can rates be cut to boost ‘potential output’ as the resulting currency crises shrinks the economy.

A 5 percent inflation target also makes a currency crisis more likely, and the resulting inflation in any case saps consumer spending and wages of hard-working people and savings of the thrifty, eventually denying capital for investments.

Concerns have been raised on recent rate cuts, amid a strong credit recovery, even as reserve collections have slowed down over several months.

The central bank can buy dollars outright as long as interest are at a level where credit disbursements from banks are less than deposits (and loan repayments) for which an appropriate rate is required.

In early 2019, EN’s economics columnist Bellwether explained that several flaws in the operating framework of the central bank (including the buffer strategy) is likely to lead to another crisis and default. The 2018 the crisis was emblematic as it was created despite fiscal corrections.

RELATED : Sri Lanka has to reform soft-peg to avoid monetary instability, default: Bellwether

Buy Sell Swaps

In the first six months of the year the central bank has also injected 109.3 billion rupees into the banking system in the first six months, by engaging in rupee generating, foreign exchange swaps, without buying dollars outright.

A generating swap is a derivative contract where dollars are bought in the spot market for new money, with an undertaking to sell forward at a fixed price (regardless of the exchange at that time) giving rise to a contingent liability in the process of creating new money.

The central bank may be purchasing dollars collected by banks in the past (when dollar loans by banks were repaid in rupee securities for example, and the transaction has nothing to do with current external developments except in so far as new NRFC deposits raised.

Even if swaps are done with new forex deposits, a contingent liability arises.

The transaction also tends to push interest rates down in the same way money is printed through open market operations out of line with current external sector developments, though foreign reserves are seemingly going up.

Analysts have warned that building reserves through swaps is similar to the policy error made by the central bank of Lebanon and generally the policy errors committed in general by the Federal Reserve that led to the collapse of the Bretton Woods system and eventually led to a bailout by Roosa bonds.

Swaps will lead to negative foreign reserves and large losses when the currency eventually collapses from the suppressed interbank or other rates.

Up to around the third quarter of 2024 in particular, the central bank had conducted exceptional policy missing its high inflation target with East Asian style deflationary policy providing dollars not only for the government to repay debt but also repay its own debt and build reserves on both a net and gross basis.
(Colombo/Aug04/2025)


Continue Reading

Tags: arrivaldrivingLankalicenseoffersRs2000Sritodayheadlinetourists
Previous Post

SpaceX launches 28 Starlink satellites from Florida, lands rocket at sea

Next Post

How a Health Crisis Sparked a $100M a Year Company todayheadline

Related Posts

ET logo

Trump tariffs power India’s swadeshi drive todayheadline

August 4, 2025
6
ET logo

Over 3,000 Boeing fighter jet workers go on strike after rejecting contract offer todayheadline

August 4, 2025
6
Next Post

How a Health Crisis Sparked a $100M a Year Company todayheadline

  • Trending
  • Comments
  • Latest
Family calls for change after B.C. nurse dies by suicide after attacks on the job

Family calls for change after B.C. nurse dies by suicide after attacks on the job

April 2, 2025
Pioneering 3D printing project shares successes

Product reduces TPH levels to non-hazardous status

November 27, 2024

Police ID man who died after Corso Italia fight

December 23, 2024

Hospital Mergers Fail to Deliver Better Care or Lower Costs, Study Finds todayheadline

December 31, 2024
Harris tells supporters 'never give up' and urges peaceful transfer of power

Harris tells supporters ‘never give up’ and urges peaceful transfer of power

0
Des Moines Man Accused Of Shooting Ex-Girlfriend's Mother

Des Moines Man Accused Of Shooting Ex-Girlfriend’s Mother

0

Trump ‘looks forward’ to White House meeting with Biden

0
Catholic voters were critical to Donald Trump’s blowout victory: ‘Harris snubbed us’

Catholic voters were critical to Donald Trump’s blowout victory: ‘Harris snubbed us’

0

Mark Cavanaugh: Integrating Safety into the Orion Spacecraft 

August 4, 2025
psychedelic

Psychedelics and non-hallucinogenic analogs work through the same receptor—up to a point

August 4, 2025
An osprey flaps its wings atop a tufa at Mono Lake.

Calls grow for boosting Mono Lake by easing L.A.’s water reliance

August 4, 2025
Taiwan family of 5 perish in landslide; son survives after staying home to care for grandpa

Taiwan family of 5 perish in landslide; son survives after staying home to care for grandpa

August 4, 2025

Recent News

Mark Cavanaugh: Integrating Safety into the Orion Spacecraft 

August 4, 2025
6
psychedelic

Psychedelics and non-hallucinogenic analogs work through the same receptor—up to a point

August 4, 2025
3
An osprey flaps its wings atop a tufa at Mono Lake.

Calls grow for boosting Mono Lake by easing L.A.’s water reliance

August 4, 2025
4
Taiwan family of 5 perish in landslide; son survives after staying home to care for grandpa

Taiwan family of 5 perish in landslide; son survives after staying home to care for grandpa

August 4, 2025
6

TodayHeadline is a dynamic news website dedicated to delivering up-to-date and comprehensive news coverage from around the globe.

Follow Us

Browse by Category

  • Africa
  • Asia
  • Basketball
  • Business & Finance
  • Climate Change
  • Crime & Justice
  • Cybersecurity
  • Economic Policies
  • Elections
  • Entertainment
  • Entrepreneurship
  • Environmental Policies
  • Europe
  • Football
  • Gadgets & Devices
  • Health
  • Medical Research
  • Mental Health
  • Middle East
  • Motorsport
  • Olympics
  • Politics
  • Public Health
  • Relationships & Family
  • Science & Environment
  • Software & Apps
  • Space Exploration
  • Sports
  • Stock Market
  • Technology & Startups
  • Tennis
  • Travel
  • Uncategorized
  • Us & Canada
  • Wildlife & Conservation
  • World News

Recent News

Mark Cavanaugh: Integrating Safety into the Orion Spacecraft 

August 4, 2025
psychedelic

Psychedelics and non-hallucinogenic analogs work through the same receptor—up to a point

August 4, 2025
  • Education
  • Lifestyle
  • Technology & Startups
  • About us
  • Contact
  • Advertise with Us
  • Privacy & Policy

© 2024 Todayheadline.co

Welcome Back!

OR

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In
No Result
View All Result
  • Business & Finance
  • Corporate News
  • Economic Policies
  • Entrepreneurship
  • Market Trends
  • Crime & Justice
  • Court Cases
  • Criminal Investigations
  • Cybercrime
  • Legal Reforms
  • Policing
  • Education
  • Higher Education
  • Online Learning
  • Entertainment
  • Awards & Festivals
  • Celebrity News
  • Movies
  • Music
  • Health
  • Fitness & Nutrition
  • Medical Breakthroughs
  • Mental Health
  • Pandemic Updates
  • Lifestyle
  • Fashion & Beauty
  • Food & Drink
  • Home & Living
  • Politics
  • Elections
  • Government Policies
  • International Relations
  • Legislative News
  • Political Parties
  • Africa
  • Asia
  • Europe
  • Middle East
  • Artificial Intelligence
  • Cybersecurity
  • Emerging Technologies
  • Gadgets & Devices
  • Industry Analysis
  • Basketball
  • Football
  • Motorsport
  • Olympics
  • Climate Change
  • Environmental Policies
  • Medical Research
  • Science & Environment
  • Space Exploration
  • Wildlife & Conservation
  • Sports
  • Tennis
  • Technology & Startups
  • Software & Apps
  • Startup Success Stories
  • Startups & Innovations
  • Tech Regulations
  • Venture Capital
  • Uncategorized
  • World News
  • Us & Canada
  • Public Health
  • Relationships & Family
  • Travel
  • Research & Innovation
  • Scholarships & Grants
  • School Reforms
  • Stock Market
  • TV & Streaming
  • Advertise with Us
  • Privacy & Policy
  • About us
  • Contact

© 2024 Todayheadline.co