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Sri Lanka was not much worried over currency troubles sweeping South Asia, Treasury Secretary P B Jayasundera said as the Indian Ocean Island followed India into import tightening.
"We do not worry too much about this situation," Jayasundera said at a post-session news briefing following a meeting of finance ministers and secretaries in the South Asian Association of Regional Co-operation.
"We have done many adjustments two years before."
India’s rupee has plummeted in the face of sterilized interventions by the Reserve Bank of India for more than a year, a problem that worsened recently by jittery foreign investors foreign investors pulling money out, while Sri Lanka’s rupee has also fallen more recently.
Jayasundera said at the conference it was re-iterated that economic fundamentals of many countries were sound and budget deficits were low.
Sri Lanka’s budget deficit was now about the lowest since the late 1970s, he said.
Jayasundera said Sri Lanka and many other countries had flexible exchange rate. No country with an interest rate targeting central bank could keep a currency fixed.
"We do not see much vulnerability," Jayasundera said. "India is a net exporter to us. What we import are textiles, machinery and agricultural items which will come at a price.
"As long as it is not cars, everything is welcome."
Sri Lanka raised cash deposits for car letters of credit to import cars to 100 percent of value as currencies of both India and Japan weakened.
Sri Lanka’s rupee has also come under pressure partly due to looser monetary policy and some pullouts by foreign investors.
Jayasundera said India had some of the best economic managers and policymakers in the world with her Prime Minister also a noted economist and the problems in the country could not be from lack of knowledge or funds.
In 1991 the Reserve Bank of India completely ran out of foreign reserves and even shipped its gold reserves abroad before halting sterilized interventions in the forex and money markets.
Analysts say sustained forex sales can rapidly depreciate currencies, destroy confidence of investors, push up even longer term interest rates to very high levels to rebalance the policy error, which then leads to banking sector troubles.
In 1997 East Asian nations that sterilized forex sales got into serious trouble despite running budget surpluses and also current accounts surpluses in the balance of payments before interventions began.
Only Hong Kong, which had a currency board, escaped depreciation though overnight interest rates briefly hit 200 percent as speculators tried to hit currency without enough knowledge about the workings of the currency regime and failed. (LBO)
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=87094
"We do not worry too much about this situation," Jayasundera said at a post-session news briefing following a meeting of finance ministers and secretaries in the South Asian Association of Regional Co-operation.
"We have done many adjustments two years before."
India’s rupee has plummeted in the face of sterilized interventions by the Reserve Bank of India for more than a year, a problem that worsened recently by jittery foreign investors foreign investors pulling money out, while Sri Lanka’s rupee has also fallen more recently.
Jayasundera said at the conference it was re-iterated that economic fundamentals of many countries were sound and budget deficits were low.
Sri Lanka’s budget deficit was now about the lowest since the late 1970s, he said.
Jayasundera said Sri Lanka and many other countries had flexible exchange rate. No country with an interest rate targeting central bank could keep a currency fixed.
"We do not see much vulnerability," Jayasundera said. "India is a net exporter to us. What we import are textiles, machinery and agricultural items which will come at a price.
"As long as it is not cars, everything is welcome."
Sri Lanka raised cash deposits for car letters of credit to import cars to 100 percent of value as currencies of both India and Japan weakened.
Sri Lanka’s rupee has also come under pressure partly due to looser monetary policy and some pullouts by foreign investors.
Jayasundera said India had some of the best economic managers and policymakers in the world with her Prime Minister also a noted economist and the problems in the country could not be from lack of knowledge or funds.
In 1991 the Reserve Bank of India completely ran out of foreign reserves and even shipped its gold reserves abroad before halting sterilized interventions in the forex and money markets.
Analysts say sustained forex sales can rapidly depreciate currencies, destroy confidence of investors, push up even longer term interest rates to very high levels to rebalance the policy error, which then leads to banking sector troubles.
In 1997 East Asian nations that sterilized forex sales got into serious trouble despite running budget surpluses and also current accounts surpluses in the balance of payments before interventions began.
Only Hong Kong, which had a currency board, escaped depreciation though overnight interest rates briefly hit 200 percent as speculators tried to hit currency without enough knowledge about the workings of the currency regime and failed. (LBO)
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=87094
