23/03/2022
Sri Lankan govt kept using reserves to keep rupee under 200 artificially decreasing their reserves from $7.1bn to $2.1bn.
It was going good until govt went out of dollars to do so & then it exploded - from 200 LKR to 280 LKR in 14 days only
There is skyrocketing inflation in single day.Sri Lanka is sinking fast. Govt doesn't have any dollars left to import fuel or even medical supplies. Exams canceled because of no money to import papers.
There is a lesson in it for countries like Pakistan.
Increase your exports. Cut your import bill. Diversify exports & make use of FTAs. Keeping artificially low inflation and putting dollars in market from reserves will ultimately blow the economy and then the people will have to handle worst circumstances who had been relieved for.
