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Currency devaluation may not be good strategy for Sri Lanka: Harsha

26 August 2015 02:49 am - 0     - {{hitsCtrl.values.hits}}

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Sri Lanka’s former Policy Planning and Economic Development Minister Dr. Harsha de Silva says devaluation of the rupee may not be a good strategy for Sri Lanka.

“Every country is trying to increase exports for same strong markets such as China. Some countries are trying to devaluate its currency for exports competitiveness. This may not be a good strategy for countries like Sri Lanka to follow. 

If American interest rates start to go up, what will happen to FDI and investment flows to Sri Lanka? Therefore we need to think carefully before any currency devaluation,” de Silva, who is a trained economist said. 

Addressing a forum on last Friday, de Silva however admitted that the rupee was under pressure and said, “We don’t know how long we can hold the currency because our exports are falling.”

According to Reuters the rupee closed at 134.25 per dollar, 0.11 percent weaker from Monday’s close of 134.10. It has fallen 0.26 percent in the last three sessions. 

Recent data showed that falling exports, strong importer dollar demand fuelled by cheaper bank credit, capital flight from government securities market and the absence of substantial dollar flows into the country were putting pressure on the rupee.

Sri Lanka’s exports fell over 50 percent in June. 

The Central Bank has sold as much as US $ 600 million of reserves in defense of the rupee in a matter of 30 days as the gross official reserves have come down to US $ 6.9 billion end July from US $ 7.5 billion a month earlier.

Meanwhile, Sri Lanka’s Export Development Board yesterday signed MoUs with three Asian trade promotion agencies from Hong Kong, Korea and Thailand for export promotion.
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