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Rising Sri Lankan Rupee Seen To Drive Up Investment Inflows

Sri Lankan Rupee | Photo Credit: Wikipedia

Resilient as it is, the Sri Lankan economy remains on the growth path and is further buoyed by the recent gains of the local currency. The rupee climbed to 178.01 against the U.S. dollar at the close of trading in the last week of March, highlighting an impressive recovery so far following the worrisome shedding of 19 per cent at the close of 2018.

The exchange rate as of March 29 showed that the Sri Lankan rupee has taken on a steady route to recovery given the losses it incurred in the past year. From January through March 2019, the rupee regained its footing significantly and is now seen on a steady and upward momentum.

The rupee rising, according to Eurasia Review, “will have a positive impact on the economy.”

“A correction with regard to the over depreciation of rupee is taking place at present. The over depreciation of the rupee compared with the index has come to an end and this is a positive sign for the economy,” the same report quoted Ravi Abeysuriya as saying.

Abeysuriya is acknowledged as one of the country’s top investment professionals and currently heads the Stock Brokers Association of Sri Lanka.

Things Are Looking Up For Sri Lanka

As a direct result of the appreciating rupee, Abeysuriya is forecasting that confidence in the local economy will grow and interest coming from investors will follow. “The appreciation of rupee which is happening at present is a positive sign,” the economist declared.

It appears likewise that the government’s fiscal policy is headed to the right direction and with increased confidence by investors, domestic and foreign, it will be unsurprising that the stock market index will eventually head north.

“With better rains and better harvest, the country will have improved living standards and more economic benefits,” Abeysuriya stated on his recent assessment.

In due time, the international rating agencies will likely rethink the downgrade mark that was handed down to Sri Lanka recently, the analyst said, adding there will be a fresh evaluation of the country’s ratings happening soon.

Regulatory Intervention

Abeysuriya lauded the move by the Sri Lankan Central Bank to restrict the inflow of “hot money” to the economy. The manoeuvre, he said, has effectively erased any uncertainties felt by foreign investors about coming to the country.

“If the rupee appreciation trend continues it will be a good thing for the country’s economy,” the analyst said, though advising too that it’s imperative for Colombo “to prudently manage the borrowings.”