Falling rupee not our fault, says minister

The political tumult has brought on an economic crisis with an increase in official interest rates from 5.62 per cent to 9.89 per cent affecting the sale of sovereign bonds and leading to an increase in foreign borrowing, UNP MP Eran Wickramaratne said.

“Loan repayments of US$1 billion taken in January 2018 and $500 million in April 2018 are now affected by this uncertainty. US$165 million has been lost in the debt and equity markets. The currency depreciation will also see imported commodities and vehicles go up in price,” Mr. Wickramaratne said.

Imports of essential items such as dhal and onions could cost more, due to the depreciation of the rupee, he said.

The Minister of International Trade and Investment Promotion, Bandula Gunawardena, blamed the rupee’s depreciation on the United National Party government.

He said the rate to the US dollar was Rs. 131 in 2015 when the UNP took over and Rs. 144 in 2016, and that the rupee had continued to fall in value to where it is almost Rs.180 now due to poor economic management by the Ranil Wickremesinghe UNP administration.

“There is a possibility of a weakening of the economy due to the current political unrest. That, however, is a short-term phenomenon. When a stable government is formed after elections, investor confidence and financial rating will improve,” Mr. Gunawardena said.

Last week, the rupee fell to an all-time low of Rs. 179.95 against the US dollar after Moody’s Investors Service downgraded Sri Lanka’s credit rating due to the political crisis on the back of financial mismanagement. It was the first downgrading since Moody’s began rating the country in 2010.

The Central Bank said the action by Moody’s “does not properly reflect the country's macroeconomic fundamentals, and therefore unwarranted”.

The Ceylon Chamber of Commerce (CCC) expressed deep concern last week about the political situation in a statement issued together with the International Chamber of Commerce Sri Lanka, Joint Apparel Association Forum and The Women’s Chamber of Industry and Commerce.

“The events of the last few weeks have resulted in absolute instability which is a situation that Sri Lanka simply cannot afford,” the institutions warned.