Sri Lanka’s coin shortage – the blame game

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by Richard Giedroyc

April 8, 2014 – What are they thinking? Sri Lanka is in yet another crisis situation regarding the availability of its coins for local circulation.
The Central Bank of Sri Lanka is doing more than studying the situation. It has identified pilgrims visiting religious shrines in India depositing coins there as culprits in the coin shortage. The central bank is blaming truck drivers for keeping coins that have been blessed as good luck keepsakes. The bank is blaming people who melt coins to be used as metal to make jewelry. And finally, the bank is blaming the Sri Lankan general public for hoarding coins that otherwise might be deposited in banks.

The January 5 ‘Sunday Times’ newspaper reported Central Bank of Sri Lanka Governor Ajith Nivard Cabraal proudly announcing a new series of commemorative 10-rupee coins, one representing each district within Sri Lanka. The new coins are to depict unique archaeological, cultural, economic, environmental, religious or social characteristics of each district.
This new series of coins may sound exciting, but think – this won’t help alleviate the coin shortage. In fact, it may make it worse!
When people start paying attention to the coins in their pockets they tend to start collecting or hoarding them. The last thing Sri Lanka needs right now is more coin collectors or people hoarding coins.
What about the expense of producing these new coins? What about the manufacturing capacity making these coins will require? This is capacity needed to strike coins that really will be used in circulation.

The central bank is correct. There appears to be perhaps as much as 22 tons of Sri Lanka coins currently accumulating in tills in Buddhist temples as panduru meritorious offerings or in Hindu kovils following Dambadiva pilgrimages to India.
It is true. The fledgling banking industry in Sri Lanka is mistrusted sufficiently that people still hoard an estimated 2.3 billion coins at home rather than deposit them into bank accounts.
It may even be true that as one source indicated, people prefer to use their coins in place of washers for nuts and bolts due to the durability of the coins and cost of the washers.
The bank is in negotiation with officials in India to retrieve some of the coins pilgrims have left behind. Sri Lanka has made it illegal to melt its coins for their metal content. The government is attempting to help its banking industry expand, encouraging people to use banks for deposits rather than their mattress. Several years ago the government began a campaign to encourage children to spend rather than accumulate coins.

The central bank needs to stay focused. A new series of commemorative 10-rupee coins isn’t going to make things better. Sure, the bank may make a profit from these coins, but is this the priority or is getting coins back into circulation more important?