Historical Sketch

The dated history on the island of Ceylon reaches back to the 7th century BC, the long-living Anuradhapura Kingdom was founded in the 4th century BC. Portuguese navigators of the 16th century were the first European to arrive in Ceylon, followed by the Dutch in the 17th, who brought the entire coast under their rule, while the Kingdom of Kandy coexisted in the island’s interior. Great Britain took over the Dutch possessions in 1796 when the Netherlands were conquered by Napoleonic France. The Kingdom of Kandy continued under a British protectorate until 1817 when it also got annexed. The Indian independence of 1947 triggered the withdrawal of the British from Ceylon in the following year. In 1972, the republic was proclaimed, and the country’s international name of the was changed to Sri Lanka.

Monetary History Overview

The British initially left the Dutch accounting standard untouched after they took possession of Ceylon in the late 18th century. Both subsidiary coins and paper money were issued in Ceylonese Rixdollar which got nominally tied to the Pound Sterling in 1812. The 1825 Colonial Currency Act introduced Sterling accounting into all British possessions. It was adopted in Ceylon by proclamation within months, and the Rixdollar was withdrawn within two years. The import of British coinage failed, however, such that the Governor ordered the introduction of British Indian currency in 1836, but the Pound Sterling remained the unit of account. In 1869, the colonial government decided to create a distinct currency, and beginning 1872, the Sri Lankan (Ceylonese) Rupee replaced the Sterling. It was at par with the Indian Rupee but decimal from the beginning. In 1885, the private issuance of paper money, which had been legalized in 1844, was abandoned, and the Ceylonese Currency Commission began operations. The 1948 independence did not alter the monetary situation. Ceylon did not follow the Indian devaluation of 1966 but devalued a year later in the wake of the Sterling devaluation. Then, the Rupee was repegged to the US Dollar until Britain floated its currency in 1972, when Sri Lanka (briefly after the country's name change) decided to follow. In May 1976, the ties to the British Pound were severed for good. In 1977, the Rupee lost almost 50% of its value, and the Sri Lankan currency development has long been loosely tied to the one of neighbouring India. The political and economic crisis of 2022 has caused a rapid decline of about 50% of the Sri Lankan currency.

Sri Lanka (Ceylon) joined the International Monetary Fund (IMF) on 29.08.1950.

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