The exchange rate appreciation and somewhat stable nature of the Rupee at present, is a temporarily scenario and Sri Lanka could not be complacent that it will continue in the long run, an economic expert said.
“Sri Lanka is still not free from basic fundamental weaknesses that prompted the Central Bank to take remedial measures to bring the situation under control. The exchange rate appreciation and the stableness we witness over the past few weeks is temporarily in nature and it will not persist in the long run,” former Deputy Governor of Central Bank, W.A. Wijewardena said.
The Central Bank should look at long term measures to stabilise the exchange rate which has a huge impact on the economy. The Central Bank should carefully monitor the situation and take action to enable a manageable exchange rates in the country, he said.
Elaborating on the long term measures that the Central Bank should be looking at, Wijewardena said that a proper strategy should be in place to improve earnings to meet the expenditure.
“The country’s earnings are inadequate to meet its internal and external expenditure at present. The earnings need to be enhanced adequately to meet the current level of expenditure. Our traditional income generating sources such as exports, Foreign Direct Investments (FDI), and foreign remittances are dwindling. In case of FDIs, the net figure of new investment for the past year was only US $ 300 million and others were the borrowings that were re-invested and not genuine FDIs, he said.
“The economic ailments are still there. They need tough economic medication. If proper monetary controls are not taken to overcome this condition in the short run, the exchange rate has the possibility of being depreciated in the long run. We should not be misled with the temporally appreciation or the stabilisation of the exchange rate which could be currently seen. It is important to restructure the exports to generate more revenue and also to restructure the external sector for improved performance,” he said.
The exchange rate last Friday was Rs 178.12 and it was at Rs 176.32 to the US $, on April 22 this year.