Rupee float was unilateral decision by Cabraal, says Anura Priyadharshana Yapa

• COPF was told Monetary Board’s decision was to devalue the rupee against the dollar only up to Rs.230

It has come to light that the decision to fully float the currency without any anchor on March 7 was unilateral as the collective decision by the Monetary Board was to devalue it only up to Rs.230 to a dollar. 

Member of Parliament (MP) and member of the Committee on Public Finance (COPF) Anura Priyadharshana Yapa revealed in parliament last week that the decision to float the currency had been taken by the former Central Bank Governor Ajith Nivard Cabraal while the Monetary Board’s decision was to devalue the rupee only up to Rs.230 to a dollar. 

“The decision on March 7th was very clear and was in black and white that it was fixed at Rs.230 (to a dollar) because we were very conscious of the dangers of a free float overnight,” MP Yapa said in parliament quoting the Monetary Board member and a President’s Counsel Sanjeeva Jayawardena when the latter was summoned by the COPF 
recently.   

MP Yapa said the COPF had summoned both the Central Bank and the Monetary Board recently to understand how the decision to float the rupee was made. “So, originally on the day before, on 3rd of March there was a discussion whether the rupee should go up to 215 and thereafter be reviewed,” MP Yapa said reading Jayawardena’s statement to the COPF. 

“Anyway, the Monetary Board’s decision was for Rs.230,” MP Yapa said quoting Jayawardena.  
“Ajith Nivard Cabraal, the Governor says considering the severity of the external swaps and the recent developments in the domestic front, the Monetary Board of the Central Bank (must) announce a comparative policy package. 

In that context, greater flexibility in the exchange rate will be allowed to the market with immediate effect,” MP Yapa read out the remaining section of the statement made by Jayawardena.  “He is the person who fully floated it,” MP Yapa then said referring to Cabraal. 

“The Finance Minister wasn’t aware of this. The Cabinet wasn’t aware of this. Today nothing can be priced because of a dictatorial and stubborn decision made by a single person even not heeding to what the International Monetary Fund (IMF) had said.

“The government must take the responsibility for this,” MP Yapa said, adding that the current economic crisis is a result of the appointment of unsuitable people to key positions. 

The float resulted in the rupee shedding its value by 70 percent so far, earning the dubious title of being the worst currency in the world. It sent inflation skyrocketing, plunging the living standards of the people to new depths, causing political instability and social unrest. 

While the official inflation is rising by over 20 percent, the unofficial inflation is measured at over 120 percent in the year through April 20 as prices of all commodities and services are re-priced almost on a daily basis as manufacturers and suppliers are fully passing on the effect of the weakening rupee to the end consumer.  Cabraal however refuted the claims saying the decision to float the rupee was a collective one by the entire Monetary Board and was something even the current Board under the leadership of the new Governor pursues. 

However, Governor, Dr. Nandalal Weerasinghe told a fortnight ago that the float was done badly as authorities failed to carry out the reforms which should have been done prior to allowing some form of flexibility in the exchange rate without completely letting it go.

Even the IMF advocated for a gradual flexibility of the exchange rate in their Article IV report a few days before the rupee was fully floated.