Feb 16, 2018

Rupee depreciates in face of political stalemate! Featured

The Sri Lanka Rupee has depreciated against the US dollar as never before.

According to the Central Bank website, the dollar buying rate today (16) was Rs. 152.89 and the selling rate Rs. 156.67.

Former deputy governor of the bank Dr. W.A. Wijewardena has told BBC Sinhala Service that the Rupee could continue to depreciate further due to the prevailing political instability.

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The dollar buying rate today (16) was Rs. 152.89
& the selling rate Rs. 156.67

According to him, exports as a percentage of the GDP have been on the decline since 2013, which could not be reversed by the present regime either.

He said Sri Lanka’s trade deficit of between nine and 10 billion USD had been bridged to a certain extent by the foreign remittances being sent by expatriate workers, which stood between 6.5 and 7 b USD in the past two years.

Foreign loans have been obtained to meet the balance requirement, which cannot be done any longer, he went on.

The depreciation of the rupee will be good for the exports, but not for the garments industry, which exports 60 pc of its production, said Wijewardena.

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If this continues for more than 3 months,
it could have an impact on economy, imports

Imports division chief of the Sri Lanka Chamber of Commerce Nishan Nanayakkara said that on the other hand, that has adversely affected imports, which account for between 60 and 70 pc of the national requirement.

He said he believed this to be temporary.

However, if this continues for more than three months, it could have an impact on the economy and imports, he said.

Foreigners are shying away from investments, which has led to the rupee’s depreciation, he said, adding that that could be stopped in the event the return of political stability.

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Political crisis surpasses economic crisis

Ex-CB governor Wijewardena also said that the country’s political crisis has now surpassed the economic crisis.

That could prevent the present, or the next, government from implementing productive policies, he said.

The only way out is an increase in exports which is possible by following medium and long term policies under an atmosphere of political stability, he said.

Wijewardena added that continuation of this situation could depreciate the Rupee further, to between Rs. 160 and Rs. 165 against the USD by the year end.