Spotlight: Econ Op-eds in Summary (Week ended 10th June '20)
1. Sri Lanka Currency depreciation and sustainable path towards economic redemption
By: Shamika Ramanayake
· Sri Lanka’s currency depreciation saw its peak in April this year as both the local and global economies were put into turbulence due to the pandemic. Since then, the CBSL’s sterilization measures complimented by weak import demand and capital controls have resulted in successful controlling of further downward pressure on LKR. This, however, may not be sustainable in the long run.
· The above measures are put in place to stop the two main sectors which could put pressure on the currency – imports and outflows arising from foreign holdings held in debt and capital markets. As the foreign participation in markets are anyway relatively low in Sri Lanka, the pressure on the currency is normally absorbed by four main sectors - exports, worker remittances, tourism income and FDIs.
· Among these sectors, exports remain the highest contributor and strongest shock-absorber. As such, measures such as expanding non-apparel-based industries with special focus towards manufacturing and establishing new Free Trade Zones should be taken to support the development of the export sector, in turn creating a sustainable path towards economic redemption.
2. Five opportunities for Sri Lanka to grow its economy post-pandemic
By: Gayan Koralage
· The pandemic has resulted in a significant loss to the Sri Lankan economy. While numerous efforts to revive the economy have been unsuccessful in the past, revitalising the economy now must also take into account the fact that the modern age is digital and self-aware, and generate economic growth based on this.
· To overcome its Balance of Payments crisis, Sri Lanka must move away from its traditional strategies and instead attempt to integrate with modern trends as well as encouraging new investment into the country. However, this will also require policy reforms.
· Achieving this can be done on multiple fronts, with investments into building up the country’s digital infrastructure and improving our tourist ecosystem being key. Additionally, encouraging investments from firms moving away from China and building up our SMEs will be crucial.
(Compiled by: Chayu Damsinghe, Promodhya Abeysekara, & Eshan de Mel)
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