Sri Lanka, Sept. 24 (HT Agency) : As much as the government had moved forward after facing and surmounting several crises in the past, it will take suitable steps to overcome the crisis faced due to the appreciation of the US Dollar. The appreciation of the US Dollar has adversely affected both the country’s economy and the home economy and the government has already initiated necessary action to face this crisis successfully, Prime Minister Ranil Wickremesinghe said.
The Prime Minister made this observations addressing a meeting held at the Nattandiya Lourdes Maha Vidyalaya after opening the school’s resource centre on September 22. The Prime Minister said whatever economic difficulties the government faced, it had increased financial allocations to develop education in tune with new world trends. Moreover, several programmes including the Gamperaliya, Grama Shakthi and Enterprise Sri Lanka had been launched to develop the rural sector.
“The government’s endeavour was to allocate 6 percent of GDP towards education. It ought to reach that target notwithstanding economic difficulties faced by it,” the Prime Minister said. “Although there is a global economic crisis today, the government would not and had no intention whatsoever to curtail funds allocated for education and health. Although the global economic crisis was a hot topic of discussion, we should find out the actual reasons which caused it,” the Premier said.
“In 2008, the US economy totally crashed causing a depreciation of the US Dollar. As such investors in the US, including those in the US share market withdrew their investments to their home countries to gain more dividends. Now, the situation had made an about turn. Today, US industrial production has increased causing rapid development. The relief measures granted to US citizens by President Donald Trump had enabled them to purchase more goods and increased the profits of US companies.
The US Federal Reserve which purchased money at low interest has increased interest rates twice,” Prime Minister Wickremesinghe said. “As a result, there was a rush among businessmen in other countries to invest in the US share market and other US enterprises. This had decreased dollar reserves in countries such as ours.
When dollar reserves decreased, our currency depreciated. We are today faced with this crisis situation,” the Premier said. The Prime Minister said the Euro depreciated by 1.3 percent, Sterling Pound by 1.3 percent, Australian Dollar has depreciated by 6.5 percent, Indonesian Rupiah by 6.8 percent, Korean Wong by 4.5 percent, Philippine Peso by 7.5 percent, the Singaporean Dollar and Malaysian Ringgit by 1.6 percent and the Indian rupee by 11 percent. This was a world economic crisis.
“We will bravely face it without abandoning or running away from it,” the Prime Minister said. “This situation would impact on oil purchases too. Fuel prices had increased owing to this. We are not able to import fuel from either Iran or Russia because the US had imposed sanctions on them. As such, prices would further escalate due to limited oil resources available, ” the Prime Minister said. The Premier said when the government assumed office, the price of a barrel of oil was 45 US dollars. Later it increased to 80 US dollars and now it has deceased to 77.50 US Dollars. Rise in the price of fuel impacted on the price of goods. Although the actual price of certain goods had not increased, the increased transport costs had added to the market price of goods.
All countries in the world had faced this plight except the US. He said 443 million US Dollars had been withdrawn from our market including the share market. As a solution to this problem, countries like Argentina, India, Indonesia, Mexico and Turkey had increased Central Bank interest rates. If we followed suit interest rates on business loans had to be increased. As such, the government had to give much thought before taking this measure. The Prime Minister said the Sri Lankan rupee had depreciated by 9 percent. In this situation importers were asking for more dollar allocations to import goods.
Exporters don’t bring the dollars earned to the country instantly. They keep those earned dollars abroad for the maximum possible period to earn more interest. The government had to cope with this additional problem too. “Amidst this situation, the country had to face a new development caused by the Customs duty war between the US and China and Canada and the US. This increased the prices of goods in the world market.
Added to this, Japan increased customs duties against US products and the US did the same to Japanese goods. This also caused the increase in price of goods,” the Premier said. “This situation was expected to continue for about a month.
The government was now busy discussing measures to meet this situation successfully. They had held discussions about this with the Finance Minister and the IMF because they had to find 4000 million US Dollars to repay the foreign debt and interest by next year. Whatever the situation, the government would never allow the economy to crash,” the Prime Minister said. “This situation had brought both benefits and losses. Although the increase in prices of goods was a loss, this had benefited exports and the tourism industry,” the Premier said. The Prime Minister also opened a resource centre at the Marawila Sri Gunaratana Vidyalaya and Nattandya Wahalapitiya Maha Vidyalaya and also presented the Act of Appointment to Ven. Haldanudana Pannasooma Nayaka Thera at a ceremony held at the Sri Pusbparamaya, Pilakatumulla, Nattandiya.