Why LKR Depreciation and Current Interest Rates Hurt Your Savings

Eden Investments
May 16
4 min read

Updated: May 16

Introduction

In Sri Lanka, savers face a daunting challenge: the Sri Lankan Rupee (LKR) has been on a rollercoaster, losing significant value against the US dollar, while inflation and modest fixed deposit rates fail to protect wealth. Economic volatility, marked by currency depreciation and fluctuating inflation, erodes the purchasing power of traditional savings. This article explores how LKR depreciation and current interest rates hurt your savings, supported by economic data and case studies, and why Eden Investments’ pilot program, offering a 9% annual percentage yield (APY) in USD, is a compelling alternative to safeguard and grow your wealth.

The Pain of LKR Depreciation

The LKR has experienced severe depreciation, directly impacting the real value of savings. In 2022, the currency plummeted by 81.16% against the US dollar, with exchange rates shifting from 200-203 LKR/USD to over 360 LKR/USD by year-end, as reported by the Central Bank of Sri Lanka. In 2025, depreciation continued, with a 1.92% drop from January to April, moving from 293.0027 LKR/USD to 298.6186 LKR/USD. For savers, this means a Rs. 1,000,000 deposit, worth ~$3,413 at the start of 2025, could lose $65 in USD value by April, even before considering interest.
This depreciation is driven by Sri Lanka’s economic challenges, including high external debt, import reliance, and limited export growth. For instance, fuel and consumer automobiles accounted for 24% of total imports in 2019, costing $4.7 billion, and depreciation increases these costs, eroding savings’ purchasing power for imported goods and international expenses.

Inflation’s Hidden Toll

Inflation in Sri Lanka has been a significant wealth eroder, peaking at 70% in September 2022 due to soaring energy and food costs, according to the Colombo Consumer Price Index (CCPI). While early 2025 saw deflation (-4% in January, CCPI), historical volatility (e.g., 12% in June 2023) and projections of 5%+ inflation by late 2025, as forecasted by the Asian Development Bank, mean savers cannot rely on fixed deposits to maintain their wealth’s value. This volatility outpaces the returns from traditional savings, reducing purchasing power for everyday expenses.
For example, a Rs. 1,000,000 savings account in 2022, even earning interest, would have lost significant real value as prices skyrocketed. The persistent threat of inflation, even with temporary deflation, underscores the need for a stable, high-yield alternative.

Fixed Deposits: Falling Short

Sri Lankan banks offer fixed deposits at approximately 7% APY for LKR and 3.5% APY for USD over three months, based on 2024 data from institutions like DFCC Bank and HNB Bank. These rates, while competitive, are insufficient against inflation and LKR depreciation.
Consider a Rs. 1,000,000 LKR fixed deposit at 7% APY for three months: it earns Rs. 17,500, totalling Rs. 1,017,500. If the LKR depreciates by 5% (to 315 LKR/USD), the USD value drops to ~$3,230—less than the initial $3,333. A USD fixed deposit at 3.5% APY grows $3,333 to $3,387, but this still lags behind inflation and offers minimal growth.
Additionally, fixed deposits often require long lock-ins, limiting liquidity in a volatile economy. This lack of flexibility is a significant drawback for savers needing access to funds during economic uncertainty.

Case Studies: The Real Impact of Depreciation

While specific case studies on individual savings accounts are scarce, economic reports provide insights into LKR depreciation’s broader effects, which directly impact savers. A 2018 analysis by the Institute of Policy Studies noted that the LKR depreciated by 10% in nominal terms by September 2018, driven by capital flow reversals and rising import costs (e.g., fuel and vehicles). This increased the cost of imported goods, which account for 24% of Sri Lanka’s $19.5 billion import bill in 2019, eroding the purchasing power of LKR savings for essentials like food and fuel.
Similarly, a 2016 report by the Daily FT highlighted that LKR depreciation (nearly 10% in 2015) led to imported inflation, with the CCPI at 4.8% in May 2016, including 5.6% food inflation. For savers, this meant that even with fixed deposit interest, the real value of their LKR savings declined as everyday costs rose faster than returns.
In a broader context, a 2024 IMF blog on emerging markets noted that currency depreciations (e.g., 4% average in 2024) can lead to financial instability, particularly through foreign exchange mismatches, affecting savings held in local currencies (IMF Blog). While not specific to Sri Lanka, this underscores how LKR depreciation increases the cost of imports and reduces savings’ real value, a pattern seen in Sri Lanka’s economy.

Eden Investments: A Stable, High-Yield Solution

Eden Investments’ pilot program, launching in July 2025, offers 100 users a 9% APY in USD, addressing these challenges head-on. By converting Rs. 1,000,000 (~$3,333) to USDT and investing in secure DeFi platforms, Eden delivers stable returns that protect against LKR depreciation and inflation. Unlike bank fixed deposits, Eden allows withdrawals after 3 months, providing unmatched flexibility. The pilot is custodial for trust, with a 3% service fee covering conversions, security, and 24/7 support, paving the way for a non-custodial platform where you control your funds.
Investment Comparison
- Eden (9% APY in USD):
  - Initial: $3,333 (Rs. 1,000,000 at Rs. 300/USD)
  - After 1 year: $3,633 (9% return)
  - Value remains stable in USD, unaffected by LKR depreciation.
- 7% LKR Fixed Deposit (with 5% LKR depreciation):
  - Initial: Rs. 1,000,000 → $3,333
  - After 1 year: Rs. 1,070,000 (7% return)
  - Post-depreciation (Rs. 315/USD): $3,397
- 3.5% USD Fixed Deposit:
  - Initial: $3,333
  - After 1 year: $3,450

Take Control with Eden

LKR depreciation, inflation, and low fixed deposit rates make traditional savings a risky choice in Sri Lanka. Eden Investments’ 9% USD APY offers a stable, high-yield alternative, protecting your wealth and unlocking global opportunities. Join our pilot to secure your financial future today!