Economists respond to Tilvin Silva’s statement on rupee appreciation | Sunday Observer

Economists respond to Tilvin Silva’s statement on rupee appreciation

12 March, 2023

General Secretary of the Janatha Vimukthi Peramuna (JVP) Tilvin Silva recently said that the Government’s statements on the strengthening of the Rupee are false. He has said that it is paradoxical to say that there is no money to hold an election and yet claim that the Rupee has strengthened. He said the National Elections Commission must declare a definite date for the election to remove such doubts.

The Sunday Observer sought the opinions of several academics and experts on the topic after the Rupee showed continuous strengthening against the dollar from last week which has visibly signified an economic and political success.

Prof. Milton Rajaratne of the University of Peradeniya said out of the rupee and dollar crisis faced by the country, the dollar crisis is the one that is most difficult to resolve. “The stability of our country and the growth of the economy depend on the strength of the rupee. Foreign remittances, which were around Rs. 200 million some time ago, have now increased to around Rs. 700 million. The millions of dollars we receive through the World Bank and the Asian Development Bank will support the start of projects in this country making it easier for us to solve the dollar problem in this country,” he said, adding that signs are afoot that many issues will be resolved in a favourable manner with the aid received from the IMF.

“This is like the light at the end of the tunnel. The rupee strengthening is that light. Its value is increasing against the dollar and can reach Rs. 250 soon. We will benefit greatly from this,” he said.

“Dollars that were hidden away have now started to emerge. Those who can, bought dollars and gold in significant amounts earlier. Now these dollars are being exchanged making the dollar drop. The amount of dollars circulating within the country is higher than remittances. It will cause inflation to drop and bring relief to the people. We can improve the situation by strengthening our exports. Policymakers must implement the necessary mechanisms. Anyway the existing situation is favourable to the economy overall,” he said.

Prof. Aminda Methsala Perera of the University of Wayamba said the country’s socio-economic stability can be improved through the strengthening of the rupee.

““In our country, when we export and earn US$ 100 million our import expenditure is US$ 200 million. The situation is under control now. When the dollar decreases, it becomes easier to import fuel, gas and coal to our country. That means the cost of the supply chain will decrease. It is a great strength for the stability of the country’s economy. It has signs of decreasing further. Through that, the people will receive a lot of relief. Our dollar reserves have increased. About half of the country’s economic problems can be solved through that. We could not pay for fuel, gas and coal because we did not have dollars. When there is a solution to that situation, the people can be given great relief,” he said.

“In the future, when we receive relief from financial institutions such as the International Monetary Fund and the World Bank, the economy will be strengthened through that. There is a situation where the dollar can go down to Rs. 250 or even lower.” he said.

Prof. Muditha Karunaratne of the University of Peradeniya said if the exchange rate remains strong, the rupee can also be kept strong. She also said that the economy can be strengthened through this. “Sri Lanka was in a severe crisis with the rupee sliding to 370 per dollar from a relatively manageable Rs.200 although that was done at an enormous cost to the economy. Now this situation has changed. We now must maintain this status quo in the long term,” she said.

She said the situation is now normalising with an increase in tourist arrivals and remittances. According to her, the economy strengthens along with the appreciation of the rupee. She said import limitations must however continue to reap the benefits of this situation.

Samagi Jana Balawegaya (SJB) MP Dr. Harsha de Silva also admits the economy has somewhat stabilised due to the strengthening of the rupee. “Inflation has decreased and an economic pattern signifies that the prices of goods will decrease, through which the prices of imported essential goods will come down and the people will be given some relief. The price of goods will decrease. Imported goods will be available. But we must understand that these activities are still taking place under strict import restrictions. The cost of importing goods has been reduced by billions. This means that this rupee is being strengthened in a contracted economy.”

Economic Analyst Chithral Jayawarna said this is an opportunity to handle the economy in a new way. “We will have to take steps to prolong and maintain this stability,” he said, adding that the strengthening of the rupee has supported the economy. According to him the fuel quota system (QR Code) must continue and the ban on the imports of vehicles must also remain, although expatriates have been permitted to bring down electric cars on concessionary terms.

“An import and export database should be prepared. Apart from the customs data, there is no system to monitor the quantity, value and foreign exchange earned by an organisation,” he said, adding that businessmen must be relieved of the increased interest rates as well.