Business Times


On rupee devaluation and the UNP: A response to Dr. Harsha De Silva, MP

We thank Dr. Harsha De Silva, MP, United National Party, for his response to our article "Rupee devaluation: Is it to save the country, exporters or the opposition?” (Business Times, April 17 2011). We wish all budding politicians are that responsive.

Firstly, Dr. De Silva wonders whom we serve. If he genuinely believes devaluation was a solution now and not doing it makes matters worse for the government, then by advocating such a solution we serve the opposition. He should be happy.

Secondly, we have not advocated an unrealistically over-valued Rupee. We explained, based on evidence, the prevailing economic conditions at present does not call for devaluation. It is not a matter of ideology. We welcome any evidence that challenges ours, which we still do not see.

Thirdly, Dr. De Silva says “the Government focus is not on exports anymore with exports as a share of GDP declining steadily over the years”. The not so steady decline, we observe, continues for some time and was not different for the two plus years rule of UNP in early 2000’s. He fails to observe in real terms that exports have steadily increased from US$4,817 million in 2001 to $8,307 million in 2010.

We anticipate a quantitative analyst like Dr De Silva to know GDP can increase due to other factors and what matters is the real increase in exports and not its share in GDP. Fourthly, Dr. De Silva refers to appreciation of LKR. Had he done a bit more careful research he would have found while LKR has appreciated against USD recently, it has shown varied performances with other major currencies for the period from January 2007 to October 2010. Performance was mixed with EUR and GBP, somewhat closely followed by (INR) and LKR has depreciated over JYN. Sri Lanka’s exports to USA was 21% in 2010. (Source: Central Bank of Sri Lanka). So is a devaluation, even it were partially effective, while introducing more serious issues.

Finally, Dr. De Silva advices us to read introductory economics textbooks. It is sad that Dr De Silva, like a typical neoclassical fundamentalist, seems to believe policy changes should be based on elementary text book theories, while new ideas on economic theory and applications are being added to the literature.

Luxman Siriwardena and
Chanuka Wattegama

CB publications at book stores

The Central Bank has released a recent publication ‘Doing Business in Sri Lanka’ and earlier another publication relating to account holders. These, we are told, could be purchased at the Bank’s Sales and Distribution Counter at Rajagiriya. However for the convenience of those who desire to purchase copies it is suggested that either allow the banks to sell copies or have them at book stores.

It will provide an opportunity to those living in the outskirts of the city and in the provinces to purchase them.

Kasi Silva

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