The devaluation announcement in the budget by President Mahinda Rajapaksa, which caught everyone by surprise, has turned into a cold war between the Treasury and the Central Bank (CB). While the Treasury is responsible for the country’s fiscal policy, the CB is entrusted with monetary policy which involves the maintenance of an effective foreign exchange mechanism.

Sri Lanka’s crude oil annual imports which should have comenced from October have been delayed unnecessarily as a result of the cancellation of the Ceylon Petroleum Corporation (CPC) tender called to obtain cost effective transportation of crude, from Iran. Over 90% of the country’s crude requirements comes from Iran because of an extended (7-month) credit facility.