Currency depreciation is a regional issue – UNP
By Maheesha Mudugamuwa
The State Minister of Power and Renewable Energy Ajith P. Perera said there will be no immediate concessions for the public as the country’s economy was not in a good state to provide concessions. However, he said there will be more long term concessions in the upcoming budget.
In an interview with The Sunday Morning, Perera said the depreciation of rupee wouldn’t last longer as the situation would be back to normal by the beginning of next year. He also stated that not only the Sri Lankan rupee, but also currencies of most Asian countries, had depreciated during the recent past.
Excerpts of the Interview;
Q: People who were troubled by rising cost of living have now been further burdened with a hike in fuel prices. What can the Government do to control this situation?
A: Now, the fuel prices are controlled by the fuel price formula. In line with the global fuel prices, the local fuel prices will increase or reduce. This is good, as the people will get the benefit of this fuel price formula in the future as the prices will be revised every two months. When there is a drop in fuel prices in global market, it will definitely be passed onto the public. Unlike the previous situation where only the government increases or decreases the fuel prices, the price formula will now control the fuel prices. It has good impacts for the country as well. Blocking the passage of fuel price increase in global market to the local market has negatively affected the country’s economy, but now the situation is different and it is good for the people. The price formula should be applied correctly. Even though the current fuel prices are high, they will go down soon. The public will get the advantage of it.
Q: Is there a plan to provide any concessions to reduce the prices of essential items in the coming budget?
A: Yes. There are a lot of concessions that the government has planned to give the public through the budget – not only to reduce the prices of essential items, but for all sectors. As of now, I cannot tell the exact concessions that the public will get through the new budget, so until the budget comes, we will keep it a secret. What I can tell now is that there will be long term concessions.
Q: What immediate concessions will the Government give the public?
A: So far, we were not aware that there will be any immediate concessions; the government is planning at present, as we’re not in an economically good situation to give concessions right now. All the concessions will be given by the budget, so you’ll have to wait few more months. We don’t want to give short term concessions, and the concessions that will be given by the budget will be long term.
Q: Currently, the Sri Lankan rupee is at an all-time low. Has the depreciation of the rupee had an impact on the overall economy and as a result impact on various industries in the country?
A: Not only the Sri Lankan rupee, but also currencies of most Asian countries, had depreciated during the recent past. The Sri Lankan rupee has depreciated by 7.4% while the Indian rupee has depreciated by 13.5%, Pakistan rupee by 12.1%, Indonesian rupiah by 9.1%, and Russian ruble by 18.2%.
The value of the rupee was determined by the foreign exchange market, and primary determinants of the demand for currency, which are import and export of goods and services, and basic indicators, remained positive in the case of Sri Lanka.
One of the primary reasons linked to the fall is expectation that the US Federal Reserve will tighten its monetary policy stance further by taking steps towards slowing down the growth in US money supply. How the slowdown in the US money supply growth affects the value of rupee is that the interest rates in the US will begin to rise as the Federal Reserve demand for various assets begins to drop, which causes a rush among investors to sell their assets in other parts of the world and invest the money in the US, where they could earn higher returns.
However, according to the predictions given by some economic experts, this situation will not continue, but will come back to normal by the beginning of next year.
We should also keep in mind that this situation has affected not only Sri Lanka, but all other countries as well, except for one, in this Asian region. Since we don’t have much export income, this situation is a challenge for our economy.
Q: When compared with the economic statistics of the previous government, what do you think about the current economic situation of the country?
A: Under the previous government, debt figures that Sri Lanka should pay to other countries were not included in their reports in order to show the public that good economic levels were reached. However, what was the truth behind all these economic statistics? The public didn’t experience what the statistics portrayed. Because Sri Lanka has to pay off massive amounts of debt, the economic situation at present is real. Our current Government never tried to deceive the public through false economic reports.