Monday Market Musings>>> Improvement in Sri Lanka’s forex situation?
Picture Credit: Reuters website
The crisis in Sri Lanka has been an ongoing ordeal for some time now, and good news is always encouraging for the weary citizens. The weight of the situation is said to be easing up. Just last Thursday (18th August) at a policy review meeting, the Central Bank governor Nandalal Weerasinghe stated that the forex situation of the country has seen an improvement and that, resulting from the Central Bank’s initiatives to lessen the nation’s economic issues, the economy has begun to show positive signs.
“We are seeing the pressure on the rupee easing as a result of exports growing and imports contracting and we hope that trend will continue,” and he also added that the exports have increased at the same time as the import expenditure has decreased, "The forex situation has improved now. We have been able to pay for essentials such as petrol, diesel and medicine." (And other commodities; cooking gas, fertiliser etc.)
Picture Credit: The Morning - Sri Lanka News website
It was also said that remittances (and other forex inflows) have been a help in paying for import expenditure of essential commodities. Allowing for the country to purchase said commodities without having to go for short term loans as before, ensuring the increase of availability of said essential goods. Central bank officials said the gap between the black-market premium and the banks have also reduced for forex. Central Bank data shows a slight decrease in the trade deficit for the first half of 2022 compared to last year’s data due to the fact that import spending has slowed down.
It is a small bit of relief compared to the gravity of the whole economic situation that Sri Lanka is currently in, with ques and shortages pretty much everywhere you look, but it is a small improvement nonetheless. The question is if there will be more “improvements”, or if this will be a one-time occurrence?
August 22nd 2022 | 6:30 PM