The government and the Central Bank of Sri Lanka (CBSL) must take measures to increase the levels of reserves if the depreciation of the value of the currency (rupee) is to be halted, academic economists have pointed out.
At present, the expenditure incurred for imports is double the amount received from exports. On the other hand, the government has inflation under control.
“There is a deficit in the foreign exchange”, senior lecturer at the Department of Economics of the University of Ruhuna, Nandasiri Keembiyahetti said. According to him, there was an outflow of and in the foreign capital invested in government securities.
As a measure, exports must be promoted or foreign capital must be obtained via an issue of new bonds, he noted while adding that otherwise foreign loans would have to be obtained.
“Hypothetically speaking, if nothing is done to control the depreciation, the local rupee will go up to Rs. 160 against the US dollar,” Keembiyahetti explained while adding that such a situation would result in an adverse impact on imports, exports and the foreign debt burden.
“The process of regaining the capital invested has not stopped. The interest rates in the United States have increased. This is a factor in the outflow of foreign capital. Elsewhere, in the world economy, the drop in prices pertaining to crude oil and certain food items is also beneficial. The government has to seek solutions to the fall of the export market. The market for synthetic rubber has been hit and the demand for tea has lessened. We must seek different markets or look into how we can increase value additions,”