Weak­ened EU - Welcome change for de­vel­op­ing world

Pakistan Observer - - INTERNATIONAL -

A.C. SHAHUL AHMEED COLOMBO—The Uk’s with­drawal from the Euro­pean Union (EU) fol­low­ing the ref­er­en­dum of Brexit - ab­bre­vi­a­tion of Bri­tish exit - has cre­ated rip­ples in global mar­kets . The Bri­tish pound fell to its low­est level since 1085. In the cir­cum­stances , in­vestors flee risky as­sets and take refuge in the dol­lar and the yen.

Brexit is a blow to emerg­ing mar­ket economies such as Sri Lanka which are al­ready hit by the global fi­nan­cial tur­moil and the eco­nomic set­back in the af­ter­math of the US rate hike in last De­cem­ber .

Sri Lanka is ex­posed to Brexit as she has fairly sig­nif­i­cant trade, in­vest­ment and fi­nan­cial links with the UK and the EU .Brexit came at a time when Sri Lanka is un­der se­vere bal­ance of pay­ments pres­sures with heavy heavy ex­ter­nal debt pay­ments amid credit rat­ing down­grades.

Sri Lanka’s lead­ing econ­o­mist Pro­fes­sor Sir­imevan Colom­bage said: The Brexit sent shock waves through cap­i­tal mar­kets .

Stocks tum­bled sharply across global eq­uity mar­kets . US shares were down by 3.6 per cent.The Dow Jones in­dus­trial av­er­age de­clined by 611 points , its big­gest drop since last Au­gust.

The Brexit is ex­pected to re­sult in eco­nomic set­backs in the UK as well as in the EU.Its im­pact would spill over to the emerg­ing Asian economies through mul­ti­ple chan­nels in­clud­ing cur­rency swings, trade ex­po­sure, bank lend­ing de­vel­op­ments , eq­uity cap­i­tal flows , in­ward re­mit­tances and tourism.. The sce­nario may change in the long run de­pend­ing on the fu­ture re­la­tion­ship be­tween the UK and the EU.

Since the EU and the UK are ma­jor trad­ing trad­ing part­ners of Sri Lanka, the ru­pee ap­pre­ci­a­tion vis-a-vis their cur­ren­cies has ad­verse ef­fects on the ex­port sec­tor.This calls for s fur­ther de­pre­ci­a­tion of the ru­pee on top of the cur­rent ru­pee weak­en­ing “said Econ­o­mist , aca­demic and for­mer Cen­tral Banker Pro­fes­sor Colom­bage said.

Sri Lanka’s ex­ports to EU ac­count for about 30 per cent of the coun­try’s to­tal ex­ports. Hence de­vel­op­ments in the EU have a sig­nif­i­cant bear­ing on the Sri Lankan econ­omy.

The de­pre­ci­a­tion of the Euro cou­pled with the an­tic­i­pated eco­nomic set back in the Euro re­gion will di­min­ish the de­mand for the Sri Lankan ex­ports. West Bank city of He­bron, known to Muslims as the Ibrahimi Mosque and to Jews as the Cave of the Pa­tri­archs.

It was the third vi­o­lent in­ci­dent in two days.

On Thurs­day morn­ing, a Pales­tinian fa­tally stabbed a US-Is­raeli teenager in her home at a Jewish set­tle­ment ad­join­ing He­bron.—Agen­cies

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