Sri Lankan Rupee (LKR/SLR): Definition, History, Conversion

What Is the Sri Lankan Rupee (LKR/SLR)?

The Sri Lankan Rupee is the official currency of the Democratic Socialist Republic of Sri Lanka, which was known as Ceylon prior to 1972.

SLR is the commonly used currency abbreviation for the Sri Lankan rupee, although the international currency code for the currency is LKR.

Understanding the Sri Lankan Rupee

The Sri Lankan rupee is divisible into 100 cents. Sri Lankan currency in circulation includes one, two, five, 10, 25, and 50 cent coins, as well as one, two, five, and 10 rupee coins. Banknotes are available in denominations of 20, 50, 100, 200, 500, 1,000, 2,000, and 5,000 rupees.

The Sri Lankan rupee frequently appears as the currency abbreviation SLR to avoid confusion with other rupees. The abbreviation for rupees is Rs.

The British pound (GBP) became the official currency in 1825. Prior to this period, the currency in use was the Ceylonese rixdollar, a currency used in parts of Europe and some Dutch colonies.

In 1836, the British declared the Indian rupee (INR) the official coin of the island nation, as it returned to the Indian currency area. In 1869, Ceylon (as Sri Lanka was referred to at that point), established the rupee as legal tender. The INR became the only legal tender for the island three years later. The country officially gained independence from the British in 1948 and established the Central Bank of Ceylon two years later.

The Economy of Sri Lanka

Since gaining independence in 1948, the Sri Lankan economy has faced constant challenges from infighting by various ethnic groups vying for government control, Marxist insurrections, and prolonged civil war.

Gross domestic product (GDP) growth was 3.7% in 2021, and inflation was 7.9%, according to World Bank data. The actual GDP is $84.52 billion in 2021, up from $56.7 billion in 2010.

Sri Lanka was the world’s second-largest tea exporter in 2020 Other major exports include cinnamon, rubber, knit apparel, and machinery. Service and technology industries also contribute to the economy.

Role of the Sri Lankan Central Bank

Sri Lankan officials placed a high priority on establishing a stable economic environment to maintain social and political order. The Monetary Law Act gives the central bank broad authority to implement monetary policy to obtain its objectives of economic and price stability. The Central Bank formulates and administers its monetary policy, and acts to influence the cost and availability of money.

At present, the monetary policy framework of the country places greater reliance on market-based policy instruments and the use of market forces to achieve the desired objectives, in particular a flexible approach to inflation targeting. It maintains a diligent watch over the supply of money and a vigorous campaign of shredding notes and replacing them as needed.

The central bank is also entrusted with designing, printing, and distributing Sri Lanka's banknotes and minting of coins. One of the unique and instantly recognizable features of Sri Lankan notes is the vertical printing on the reverse side. Other distinguishing features include cotton stock and raised textures for the visually impaired. Banknotes also feature watermarks, security threads, see-through images, ink shifting, and other security measures to combat counterfeiting.

Converting Sri Lankan Rupees

Assume that the USD/LKR exchange rate is 181.26, which means that it costs 181.26 SLR to buy one U.S. dollar (USD). If the rate rises to 190, that means the rupee has lost value, since it now costs more LKR to buy one USD. If the rate were to fall to 170, the LKR would have appreciated since it now costs fewer rupees to buy one USD.

To find out how many U.S. dollars can be bought with one LKR, divide one by the USD/LKR rate. This will provide the LKR/USD rate (notice the codes are flipped) of 0.0028. That means a Sri Lankan rupee will buy about half a US cent.