Sri Lanka needs to grow food to stabilize exchange rate: Treasury secretary

Jan 26, 2012 (LBO) - Sri Lanka has to grow more food to reduce imports which will help strengthen the exchange rate, Treasury Secretary P B Jayasundera said, as the country lost almost a quarter of its foreign reserves defending a dollar peg. "There is no economic justification to import any longer the kind of food that we can produce," Treasury Secretary P B Jayasundera told reporters.

"The country needs to replace at least part of the imports currently taking place. And it should not take time. That is why we decided to go for an aggressive food production drive."

Up to a billion rupees of imports could be replaced this year itself.

"It’s a relief because we can't reduce oil imports," he said.

Jayasundera said oil imports were a key reason for the rising trade deficit, but there was no choice but to import oil until Sri Lanka started to produce its own, perhaps in 2015.

In Sri Lanka oil imports are frequently blamed for balance of payments troubles, which started with creation of an unstable soft-pegged central bank in 1950, abolishing a hard peg which had kept the exchange rate fixed from 1884.

Jayasundera said Sri Lanka imported about 200 billion rupees or about two billion US dollars of agriculture rela