Over valued rupee:

Severe blow to exports

The country's foreign exchange crisis has aggravated with exporters claiming they are unable to be competitive and as a result losing buyers due to the over valued currency.

An official of the Sri Lanka Tea Board said that Sri Lanka's tea export sector will be uncompetitive and lose its market share if the rupee is not depreciated. Major tea producing and exporting countries have devalued the currency to be competitive in the international market.

"The over-valued Sri Lankan rupee is an added disadvantage to the tea export industry which is severely affected by the sharp drop in demand from major importing countries due to the global economic meltdown", he said.

Tea exporters said that Sri Lanka has to compete with countries such as Kenya, China and Vietnam which produce and exports more tea and which have devalued the currency.

Unless measures are taken to solve the crisis the quantum of tea exports will drop which will have a major impact on the country's economy.

Chairman, Hayleys Group, N.G. Wickremeratne during a seminar on the impact of the global financial crisis on Sri Lanka's export sector said that there should be a reasonable devaluation of the rupee.

Chairman, The Kingdom of Raigam, Ltd.Dr. Ravi Liyanage said while the Sri Lankan rupee should be devalued in a manner that will not have adverse consequences on commodity prices which will result in inflation.

Exporters said that they will not be able to survive in the highly competitive world market. Importers will resort to alternative sources than to buy at a higher price from Sri Lanka.

Former BOI Chairman, Prof. Lakshman R. Watawala said that what is needed is not a sharp depreciation but a reasonable devaluation of the rupee. A free-float of the rupee will help ease off the problem enabling exporters to gain advantage.

Partner, Gajma and Co Chartered Accountants, N.R.Gajendran said currency should fetch its true value in the market. The currency should be managed to a certain extent but not excessively which could have a negative impact on the economy.

Economists have warned that the country's reserves have depleted and are inadequate to service the import sector and that steps should be taken to enhance export revenue to balance the trade deficit.

The Central Bank in a statement released recently said that the country's external reserves were not running short and that it was sufficient to meet expenses.

Experts are also of the view that a devaluation of the rupee will have an adverse impact on the commodity prices and would result in high inflation. The exchange rates have to be adjusted according to a fair value. (LW)