Market confidence needs to be restored immediately
While Sri Lanka witnessed the resignation of the President Gotabaya Rajapaksa on Friday after he fled the country this week, top economists urged that market confidence needs to be restored immediately.
A reliable source attached to the banking sector told the Business Times that until market confidence is restored to indicate the country is serious in achieving certain immediate, short and medium term corrective measures it is unlikely that there would be positive outcomes.
Maintaining policy coherence through collective action is vital, the source added while stressing that at a time like this it is not possible for everyone to individually achieve their own goals. “We need to prioritise, sacrifice and very importantly be genuine. If we can get more remittances to the banking system and tourism inflows to start with while keeping the imports low it will be great.”
Another top economist and a banker reiterated, “I am not very convinced by the contention that the removal of the Rajapaksas will result in money flowing into the country on its own accord.”
He added if a functioning government is established, an IMF staff-level agreement is finalised and debt advisors finalise a debt restructuring plan in the next couple of weeks, confidence can be boosted and some money can start flowing in.
“In the meantime, Sri Lanka will have to rely on ACU (Asian Currency Union) collections, Central Bank of Sri Lanka purchases from the market and hopefully a new SWAP and oil facility from India. The latter assistance from India is still being negotiated. Things are very tight,” he noted.
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