ECONOMYNEXT – The history of paper money in Sri Lanka will be the focus of a lecture by The National Trust this month ranging from the Dutch Rix dollars to modern depreciating rupees.
Kavan Ratnatunga, an astrophysicist who has worked in the US, who has a deep interest in Numismatist, will deliver the lecture on June 27 at the HNB Auditorium, the National Trust said.
Early Dutch Rix Dollars were redeemable in copper.
Note issuing banks such as The Chartered Mercantile Bank of India, London & China – Ceylon Branch, Oriental Bank Corporation issued banknotes from 1844, till they crashed in early 1880.
Banks such as Oriental Bank Corporation crashed due to bad loans from coffee blight. Troubles were worsend by with exchange risk of borrowing in gold and lending in silver-pegged rupees, analysts say.
In 1885, the British set up a currency board (Board of Commissioners of Currency) to issue rupees fixed to the Indian rupee. Around 1900 Boer Prisoner of War notes had been issued.
The Currency Board had issued Ceylon rupees until a central bank was set up.
Over the years the language used in the paper money had changed from Dutch to English to Sinhala and varying amounts of other languages.
From 1951 the central bank started issuing paper rupees, under the Bretton Woods system, pegged to the US dollar, which was supposed to be backed by gold.
The central bank had issued notes under the signature of the Minister of Finance and its Governor.
The rupee now has no intrinsic value.
But when too much rupees are printed, and the rupee falls, the central bank defends the currency based on several convertibility undertakings, analysts have said.
People are usually forced to use fiat money by legal tender laws and the threat of penalties and other legal impediments for holding or using foreign currencies.