Step up exports to regional countries - Dr. Koshy Mathai

by Gamini WARUSHAMANA

Sri Lanka should explore regional markets to increase its exports under the present global scenario where the recovery in consumer demand in the traditional markets in the US and EU is slow, said resident representative of the IMF Dr. Koshy Mathai. At the opening of the 2011 annual sessions of the Sri Lanka Economic Association (SLEA) Dr. Mathai said that Sri Lanka should take advantage of the eight percent growth in neighbouring India for economic growth in the country.

Sri Lanka needs to look in the direction of the global East and increase its exports to regional countries using bilateral and regional economic corporations and trade agreements.

He pointed out that Sri Lanka’s exports to regional emerging economies India and China is smaller than five percent and two percent compared to the US and EU.

He also pointed out that over the last 15 years Sri Lanka’s exports and export competitiveness has been on the decline. Export to GDP ratio has declined from 30 percent to 17 percent.

During the period Sri Lanka’s total exports (as a percentage of global exports) has also declined from 0.06 percent to 0.02 percent. This means that you are not doing well and you have to normalise the situation. T

o correct this positions Sri Lanka has to look at new markets because the US and EU markets are not growing, he said.

Explaining the global economic situation, he said that global demand rebalancing is not taking place and private demand is not picking up despite stimulus packages. China exports like mad and US consumes like mad. To re-balance global demand consumption in emerging economies should take off, he said. This year the global economic growth rate will be at around four percent and 1.5-1.6 in the US and the same in the EU. Emerging economies will grow at over six percent.

He said that although Sri Lanka’s external reserves position is healthy, its composition should be changed and non-debt component of the reserves should be increased in order to get ready to face external shocks.

The IMF has a dispute with the Central Bank over its exchange rate policy, which sells dollars to keep the exchange rate steady. The debt component dominates the reserves this has to be changed to face global uncertainties.

Artificially keeping the rupee stronger will erode its export competitiveness, he said.