Maintaining the Sri Lankan Rupee at a highly overvalued level by providing dollars to the system through high cost borrowing has seriously eroded the competitiveness of the fledgling export sector, according to Rienzie T. Wijetilleke, Chairman HNB Assurance (HNBA).
In his annual 2008 review of the company he has said that Sri Lanka is already facing a significant reduction in demand for its main exports such as apparel, tea and rubber, a situation which is compounded further by the lack of competitiveness caused by an overvalued currency.
“Sri Lanka will also have to face a reduction in the growth of remittances from expatriates. Attracting foreign investments and borrowings to finance widening deficits in the budget and the balance of payments will also be a major constraint in the current environment. If this issue is not addressed soon by allowing the Sri Lanka Rupee to depreciate gradually towards a more realistic level, the medium term damage to export industries could be irreversible, especially in the context of a fall in demand resulting from the global recession,” he has said.
He has also noted that the medium term damage to export industries could be irreversible, especially in the context of a fall in demand resulting from the global recession.
He has said that although the insurance industry has so far not been seriously affected by these factors, it is only a matter of time before the industry begins to feel the impact due to negative effects on the purchasing power of its clients of all categories. HNBA last year achieved a growth in profit by 24% at Rs 165 million compared to Rs 122 million in 2007. |
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