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Wednesday, June 26, 2024

EC warns of further depreciation of rupee, trouble in garment sector

A senior advisor to the European Commission (EC) has said that the exchange rate would stabilize at Rs. 138 per US dollar within the next six months.

The warning was given by Dr. Dilesh Jayantha, economic advisor to the European Chamber of Commerce, at a seminar organized by the EC on Oct 3, evening at Hilton Colombo Residence, to discuss the Euro zone crisis and its impact on the Sri Lankan economy.

At the beginning of the year the dollar was trading around Rs. 114.

The EC official’s assertion was endorsed by Dr. Indrajit Coomaraswamy, a former Director, Economic Affairs Division at the Commonwealth Secretariat and one-timer staffer at the Central Bank of Sri Lanka and the Finance Ministry.

Both experts asserted that the current exchange rate didn’t reflect the actual situation. They said that the local currency could stabilize at Rs. 138, thereby bringing relief to Sri Lankan exporters. The current exchange rate wasn’t realistic, they said.

Commenting on recent developments in the money market, Dr. Coomaraswamy said that stabilization of the exchange rate through international borrowings as well as State intervention was counterproductive. He frowned on the recent floating of an international bond.

Roshan Lyman, head of trade delegation of the European Commission cautioned Sri Lanka that the local garment trade had been affected by the withdrawal of the EU’s GSP plus trade concession. The official said that Sri Lanka didn’t feel the suspension of the facility earlier as European buyers had been compelled to procure Sri Lankan garments due to civil unrest in Bangladesh. The EC official asserted that the absence of GSP plus facility could now badly affect the local industry.

All three of them said that tangible measures were needed to put the economy on an even keel.

Industry sources told The Island that the government should review its fiscal policy, taking into consideration the crisis in Western money markets and that the warnings sounded by EC representatives as well as Malcolm Cardinal Ranjith as regards rapid growth of Sri Lanka’s debt were timely.

The government is expected to present the next budget in the middle of next month.

Much to the disappointment of the participants at the seminar, the EC served only tea and biscuits probably to remind the participants the ground situation.
Shamindra Ferdinando


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