Economy of the country is at risk – experts observe

Economy of the country is at risk – experts observe

Economy of the country is at risk – experts observe

Written by Tharushan Fernando

02 Mar, 2017 | 9:08 pm

Economic experts reiterate that the economy of the country is at risk as due to deteriorating investor confidence ..

The foreign investment on government securities, also known as treasury bonds and treasury bills, is a
determining factor of the investor trust that is placed on a certain country.

The foreign investments on government securities are listed on the weekly economic index of the Central Bank.

FDIAs per central bank data, Rs.453.4 billion had been invested by foreign investors on government securities in the week that concluded on the 25th of February 2015. By 2016 that amount had decreased to Rs.260.1 billion.

Thereby, foreign investments worth 193 billion rupees have been withdrawn by the investors in this time frame alone.

As per the data released by the Central Bank on February 22, 2017 the foreign investments on government securities stood at Rs.196.1 billion.

Thereby, a staggering Rs.257 billion have been withdrawn by foreign investors in the past two years.

FDI2Another factor that is highlighted when observing the data of the Central bank of Sri lanka, is that during the week of the gazette notification issue, that arose at the presidential commission to inquire into the issuance of treasury bonds and bills, foreign investors had withdrawn Rs.15.3 billion.

Former Deputy Governor of the Central Bank of Sri Lanka Dr. W.A Wijewardena says that the bond scams that took place in the country had aided in this situation where foreign investments are being withdrawn.

Former Deputy Governor of CBSL, Dr. W.A. Wijewardena charges that FDIs are not coming to the country.

GOV

He pointed out that a large number of foreign investors had invested in securities and that amount stood around US$. 4.5 billion in 2015.  However, the amount has reduced to US$ 1.3 billion and US$.3.2 billion has gone out of the country which has resulted in the depreciation of the rupee.

“Today the USD to LKR stands at 155. If the remaining 1.3 billion is taken out, we do not know what will happen to the rupee . This is because the necessary steps were not taken regarding one event at the right time.”

The selling price of a US dollar which stood at Rs. 133.37 at the beginning of the year 2015, now stands at Rs. 153.21
Prof. Ranjith Bandara from the Department of Economics of University of Colombo said that if the amount increased by Rs.20 in 20 to 21 months the amount that it will be in few months cannot be predicted

ProfHe added that the government must revisit the economic policy of the country and check what the negative factors are.

“The foreign direct investments did not increase in the past 21 months. How can we generate jobs? How can we reduce the increasing debt servicing ratio? How can we secure the value of the rupee? When we take all this into consideration we can see that we are directing the economy towards a bad place. What is the result of this? All this is interconnected. Be it the depreciation of the rupee, the reduction in the foreign reserves, or the balance of payment issue or the debt crisis these are all parts of the same stream. These are connected to the trust placed by investors in the country.”

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