May 4, 2007 (AFP) – Sri Lankan children are being encouraged to raid their piggy banks in a bid to end a serious shortage of loose change in a country where inflation is making coins worth more than their face value. State-owned banks are offering colour pencils, felt pens, drawing paper and books to children who part with their savings in exchange for bank notes, promising the gifts will be worth 20 percent more than the coins handed in.
“If children break their piggy banks and bring the coins back to circulation we will give exercise books and pens in addition to returning the money in bank bills,” said Deputy Finance Minister Ranjith Siymbalapitiya.
The offer of an extra 20 percent in the form of gift coupons coincided with the traditional new year last month and followed a major shortage of coins essential for the cash-reliant transport and retail sectors.
Minting cheaper steel coins plated with copper and nickel has not helped, according to the Central Bank of Sri Lanka.
The central bank tried in 2001 to coax people to put unused coins back into circulation by urging students to break into their piggy banks, but the scheme flopped.
The finance ministry expects the added incentive this time round will pay off.
The 20 percent premium has a resonance as prices have surged by that amount in the past year and the island nation which imports many consumer goods as well as commodities has seen older coins made with copper and nickel snapped up for the metal.
The economy has also been hit by decades of ethnic war that has claimed more than 60,000 lives in the past 35 years including an upsurge in fighting between Tamil rebels and government troops in the past year that has hit tourism, a mainstay of the economy.
Even commemorative gold and silver coins had been snapped up by foundries to melt and make jewellery as the precious metals in the coins was worth more than the face value of the coins themselves.
The Central Bank got wiser in July 2004 and briefly withdrew the coins from sale before repricing them at the market value of the precious metals. Yet, the 5,000 gold coins and 25,000 silver tokens had been a sell out.
— Metal worth more than face value of coins —
Jewellers said it made good business sense to melt down the coins, albeit illegally, although no one would admit to doing so.
The less glamorous nickel and copper coins may find their way into Sri Lankan homes, not by way of cash but as more expensive copper screws used by the construction industry.
Five and 10 cent copper coins are almost extinct with only the cheaper aluminium replacements found occasionally.
“You almost never get change money from bus conductors,” said local businessman Chaanda Wijesekera. “Their excuse is that they don’t have change. We have a big shortage of small change.”
The coin shortage is partly due to the older nickel coins being used as washers. By drilling a hole in the middle, a coin is turned into a washer that is a cheaper and more durable alternative to galvanised steel washers used in motor vehicles.
Central Bank of Sri Lanka assistant governor Rose Cooray said small denomination coins are no longer issued because the cost of minting them is higher than the face value.
The island does not make its own coins, instead getting supplies from the Royal Mint of Britain, the Royal Canadian Mint or the Monnaie De Paris of France.
Cooray declined to give the cost of minting, but said sharp rises in base metals prices had rendered the traditional coins uneconomical and the bank had opted for the cheaper plated coins from December 2005.
“We are saving about 600 million rupees (six million dollars) with the new coins,” Cooray said. “The earlier series of coins will also be legal tender but we won’t mint them anymore.”
Sri Lanka may also have lost some of its five rupee coins to Britain where the coin is known to have fooled vending machines to accept it as a one pound coin. At the current rates, a pound buys 43 five-rupee coins.
Other coins get lost in traffic as Sri Lankan motorists like attach “blessed” coins to their steering column for safe journeys on local roads that are among the world’s most dangerous.
Notwithstanding the coins blessed by Buddhist and Hindu priests, the highways claim about 2,000 lives annually. Coins are also thrown along funeral processions to ensure a prosperous after-life for the dead — a practice that is becoming a luxury many can no longer afford.