Liability Dollarization

Chandi Dharmaratne

May 10, 2012 (LBO) – Sri Lanka’s Dialog Axiata, the island’s largest mobile operator which also sells fixed access services said it lost 530 million rupees in the March 2012 quarter, hit a 2.1 billion rupee forex loss on foreign loans. The firm said it lost 27 cents per share, down from a 14 cent earnings per share a year earlier on profits of 1.29 billion rupees.

Group revenues grew 18 percent to 10.9 billion rupees in the March quarter and costs grew at a slower 13.8 percent to 7.2 billion rupees allowing it to grow gross margins 24 percent to 5.6 billion rupees.

The firm’s finance costs rocketed to 2.2 billion rupees in the March quarter from just 50 million rupees a year earlier, hit by a 2.2 billion rupee forex loss.

Sri Lanka’s rupee fell from 110 to around 130 in the first quarter as the peg gave way under sterilized sales of foreign exchange by the Central Bank.


Sri Lanka has a soft-pegged exchange rate where a central bank tries to target both the exchange rate and also the interest rate by printing money.

Sri Lanka established a central bank with money printing powers in 1951 to join the failed Bretton Woods system of soft-pegs abolishing a hard peg or currency board that