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Sri Lanka wants exports before steep currency appreciation: Treasury Secretary
07 Jan, 2013 07:33:07
Jan 07, 2013 (LBO) - Sri Lanka would like to see stronger exports, and less imports before an "un-necessarily" appreciation of the exchange rate, Treasury Secretary P B Jayasundera said.
"If you all don't talk about the exchange rate, the rate will appreciate even more," Jayasundera told reporters in Colombo.

"But we don't want the exchange rate to appreciate un-necessarily until we promote exports and moderate imports."

Sri Lanka's rupee fell from around 110 to the US dollar to 134 in 2012 after it was floated in February 2012.

The rupee came under pressure due to bank loans taken to subsidize oil was then effectively accommodated by central bank credit injected to sterilize foreign exchange sales. Energy prices were also jacked up to reduce bank credit.

The rupee ended the year around 127.50 to the US dollar.

Jayasundera was questioned by reporters on his forecast last year the rupee will stabilize around 125 to the US dollar.

"It is moving in that direction. So allow it," Jayasundera said. "I am not an astrologer, I am economist and neither am I a journalist. I am professional economist. Economic fundamentals will decide what the rate is.

"That fundamental being, exports must grow, imports must moderate and the rate will stabilize. I am only proud of the the action the government took has helped the exchange rate stabilize."

"Country should be proud that imports moderated. The exchange rate has given benefits. Therefore it is stable.

"It did not go to 150. I mean you have to be happy about that. It did not go to 135. I am happy about that. On the other hand if it did go to 135, somebody can still pay the price."

Sri Lanka's rupee has depreciated ever since a money printing central bank capable to sterilizing foreign exchange sales and monetizing debt generally was built in 1951 a day before entering the failed Bretton Woods arrangement soft-dollar pegs.

The Bretton Woods eventually collapsed in 1971-73 after massive foreign reserve losses by the Federal Reserve creating fully fiat inflationary paper money.

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2. Wadda Podda Jan 07
I'm not an economist either, but I predicted(only common sense) that the Rupee can't appreciate further. Fb disregards the import trends and talks about the liberty of citizens etc. Believe me fb, I am also an ardent champion of civil liberties. But you can't disregard the fact that the exports are suffering. Whilst other export nations like Japan, USA, Europe, island Britain are racing to the bottom with their currencies it does not make sense to appreciate your currency. Of course, SL has a fair amount of debt denominated in foreign currencies, but that's their own doing.
1. Wadda Podda Jan 07
A plane crashes in some remote mountains. There are only 3 survivors.
A Historian, Scientist, and an Economist. After going for days without food they find a can of beans. Now the dilemma how to open the can.

Historian says, lets make a chisel out of the stones and pry open the can. Scientist says, let's built a fire and heat the can. When pressure develops inside the can it will bust open. Economist ponders a while and adds, let us assume we have a can opener.

About being a professional economist.