Sri Lanka should watch external sector developments: economist

June 01, 2008 (LBO) – A strong balance of payments position and a strong currency is giving stability to Sri Lanka’s external sector. But it is at odds with the high inflation the country has been seeing in recent months. Q: What about the EU? Is the situation better there?

A: In the EU it is more balanced. Because there (in the EU), there was no slowdown in the economy like in the US – especially if you look at 2007. So in Europe the countries that had preferential trade agreements in 2007 sharply increased their market share and saw an increase in shipments to the EU. While the countries that did not have preferential trade agreements had a negative growth in garments exports to the US. Sri Lanka also followed that – where Sri Lanka had a good year in terms of exports to the EU with the GSP preferential scheme.

Q: We have GSP+. Now there are doubts about its future. How will that affect Sri Lanka?

A: If you look at last year what has happened – this is an ADB study that was done – clearly looking at the report, the countries that had preferences did well and the countries that did not have preferences did not do well. So if Sri Lanka did not have the GSP plus, the gro