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Steadily rising US$ hits Lanka’s consumer where it hurts
View(s):The spiraling exchange rate of the US$ for the past several months is causing much concern among Sri Lanka’s importers hard hit by its rise. Importers of food items, building materials and agricultural products said that the present trend has dampened sales as their cost has risen due to the escalating dollar.
Last week, the dollar further strengthened by gaining US cents 10 to the LKR from the previous Friday, standing at LKR 133.80 to the US$. With the US economy strengthening and oil prices falling by the day, market sources predicted the US$ would rise further, increasing hardship of the already burdened consumer.
Sri Lanka Economic Association, President, Prof A.D.V.S. Indraratne, commenting on the impact of the rising US$ on Sri Lanka’s economy, said if the current trend continues, it would affect the country’s balance of payment. He said that, our imports which are double our exports would drastically affect our balance of trade.
“Our export income will keep falling against our import expenditure, affecting the resources available for investments,” he conceded. Explaining further, he said although the Central Bank can intervene and prop up the LKR, it would only be a short term solution. “This will only contribute to inflation,” he said.
He said the only way to mitigate the present crisis was for exporters to look at innovative businesses and niche markets that would bring in more foreign exchange into the country. “We should increase our productivity and add value to our export products, to attract new markets,” he said.
The US economy is growing since 2008, with its housing market, employment and financial conditions improving. With the US Federal Banks poised to increase interest rates in September this year, the US$ is expected to rise even further.
Interestingly, Sri Lanka is not alone in the crisis, even Europe, China and Japan are pumping in liquidity into their economy to cushion its fall.
Currently the US$ is at a 12-year high against the euro and a 7-year high against the Japanese Yen. Last Friday, the Yen stood at 122.76 and the euro at 0.901 to the US$.