The government did the worst thing possible by allowing the Rupee to free float without any limits. Sri Lanka just lost 30% of their wealth . Now wait for inflation to push the prices to record levels and GDP to reduce by 30% and Debt to be revalued . This must surely be the worst depreciation in the history of Sri Lanka. A massive depreciation of 30% overnight increases the cost of imports so there will be an increase in cost-push inflation. A
depreciation makes exports more competitive – without any effort. But given the low gdp contribution of exports, in the long-term, this does not increase exports as expected and could lead to declining productivity and rising prices. The price spikes have been seen across every key commodity already , where we consumers spend our money. This depreciation will make it more acute . Fixed income earners like pensioners will lose money to inflation as they’re holding these cash and bonds and they think that cash is safe.
Sri Lanka runs large deficits and this means the Central Bank will have to sell a lot of debt, also that means that the central bank will be forced to push interest rates up to make up that supply-demand gap, rates would rise a lot and shut things down, or they have to make up the gap do more printing of money. Sri Lanka will have to face a massive increase in fuel and gas prices. PB Jayasundara and his team have to take responsibility for depleting the foreign reserves by reducing taxes and allowing a free flow of imports. When history is written it will be said this government had the Worst incompetent economic team in the history of economic management . Central Bank, Basil Rajapakse, SR Attygalle, Gotabaya Rajapakse and PB Jayasundara will have to take responsibility and must be held accountable . At least now get a proper team or have an all party government to save Sri Lanka, this country does not belong to the Rajapakse family or to the SLPP. Sri Lankans now get ready for the worst, which is yet come. What is the opposition doing in all this? Like PB Jasaundara was quoted saying some time ago – only god can save Sri Lanka . This is very true, the 30% depreciation will make Sri Lanka “hell on earth” for the average Sri Lankan.
Adolf
