Lanka's rupee devaluation is a right step: IMF

23 November 2011 05:19 am Views - {{hitsCtrl.values.hits}} 7 Bookmark

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The International Monetary Fund said on Wednesday that Sri Lanka's devaluation of its rupee currency was a good step and should support the island-nation's export competitiveness and safeguard its reserves over the medium-term.

"We think that the exchange rate adjustment was a step in the right direction and should help support Sri Lanka's export competitiveness and safeguard its reserves over the medium term," Koshy Mathai, Sri Lanka's IMF Resident Representative told Reuters via e-mail.

Sri Lankan President Mahinda Rajapaksa, acting in his capacity as Finance Minister, proposed a three per cent devaluation with immediate effect to help exporters and cut import costs, while giving his 2012 budget presentation to parliament on Monday. (Source: Reuters)

Comments - 7

jaya Wednesday, 23 November 2011 06:54 AM

Wise decision had been taken by Government at last. I think LKR has to be 115- 120 if support to exports

10 15

dhana Wednesday, 23 November 2011 06:58 AM

China, India and now Sri Lanka.. Is this a chinese influence in the region to counter US dollar or it represent true economic situation of Sri Lanka?

7 7

Don Quixote Wednesday, 23 November 2011 07:36 AM

How can it "cut import costs" ? Can somebody please explain ?

3 29

kondebendapucheena Wednesday, 23 November 2011 07:35 AM

They have listen to you

4 7

Globetrotter Wednesday, 23 November 2011 12:07 PM

Don,
When a currency devalues, imports become more expensive and therefore imports reduce. This would lead to a reduction in the overall import bill in the long run.

In the short run, current import bills would likely be in US dollars hedged at Sri Lanka's earlier, non-devalued exchange rate. Therefore, fewer Sri Lankan rupees will be buying US dollars to pay our bills. This would also have a short term effect of reducing import bills.

2 6

David Wednesday, 23 November 2011 12:44 PM

How come it's going to increase export when we have to buy raw materials in higher dollar rate for export goods production? For example Petrol?

0 0

Pedro Wednesday, 23 November 2011 12:59 PM

'When a currency devalues, imports become more expensive and therefore imports reduce. This would lead to a reduction in the overall import bill in the long run.'

Actually, this depends on several factors. Imports' quantities reduce, but prices for imports increase, the net effect is not clear.

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