Global crisis will take 12 to 15 months to stabilise - Millennium IT MD

"Even though Sri Lanka will not have a direct financial crisis, Sri Lanka will definitely be impacted by the slowdown of the global economy," said Tony Weeresinghe, Managing Director and CEO of Millennium IT, a premier technology solutions provider serving the global capital market industry. "Inter bank borrowing rates in the short-term, have risen sharply. As a result, banks have fewer funds to lend to individuals and businesses.

This means slower businesses growth and lower demand for goods and services.

As many countries such as Sri Lanka are supplying goods and services to western buyers, the lower demand will trickle down to all parts of the world," he said. "For instance, if people don't buy shirts, the demand for shirts will drop.

Therefore, manufacturing orders to Sri Lanka, for shirts, will drop. This means businesses will have to downsize for mere existence and it's the same for the service industry".

"IT work outsourced to countries such as Sri Lanka will drop, as there is reduced demand. If you were servicing larger banks, such as Lehman Brothers, you will no longer have business, as these institutions have collapsed," he said. Governments have already taken action to build investor confidence and stimulate economies.

The US Congress approved a US$ 700 billion rescue package to restore confidence in the financial system and the US Federal Reserve cut interest rates.

The Bank of England, and The European Central Bank have followed suit. However, the problem is not near to being over, he said.

"What can be seen now, are signs of a spill over from the financial crisis to the real economy. For instance, auto financing is less available and car sales have dropped, approvals for home mortgages have got much tougher and credit card interest rates have gone up," he said, adding that the the situation is not expected to change any time soon.