News
Rupee going down, prices of imported items up
View(s):The depreciation of the rupee in relation to the US dollar will increase prices of imported consumer items.The large proportion of the cost increases in imports is likely to be directly added to the prices of the products, Ceylon Chamber of Commerce Import Section Chief Dinesh de Silva told the Sunday Times.
The rupee which was falling against the dollar recovered slightly this week following the bond issue by a state bank. The rupee value in relation to the dollar stood at Rs. 135.74 on Friday. However, importers said the impact of the rupee decline would be felt by consumers in the coming weeks.“We have to wait and see how the prices go up. The danger in imports is that there are no controls in the prices and costs, whereas exporters will try and control the price and improve on value additions and efficiency to remain competitive in the global market,” Mr. de Silva explained.
Expressing the same sentiments, Colombo Traders Association President K. Palaniandy said that when the cost of imports went up, the increase would be directly transferred to the consumer by the traders to maintain viable businesses. “We may see increase in prices from next week when the new stocks come in to the market,” he warned.
The construction sector is also affected by the rupee depreciation as prices of raw material are expected to rise, Dr. Surath Wickramasinghe, Chairman of Chamber of Construction Industries (CCI) said. “The burden is more on the industry as a large cess is imposed on most of the imported building material,” he said. New projects would be more affected than the ongoing projects.
The CCI was looking at the possibility of negotiating at least a temporary cess relief proportionate to the rupee depreciation, he said. However, the Government had no plans for concessions at present, Policy Planning and Economic Development Deputy Minister Harsha de Silva said.
Defending the decision by the Government to let market forces take their course, he said the Government would intervene only if there were drastic fluctuations. “We need to encourage exports, until we do that the situation will not improve in the long term. Exports have dropped to 14.5 per cent of the total GDP from 35 per cent 10 years ago, the direction of this has to change if the economy is to improve,” he said.