SLID Webinar - Sri Lanka’s Economy: ‘The Next 6 Months’ concludes | Daily News

SLID Webinar - Sri Lanka’s Economy: ‘The Next 6 Months’ concludes

The Women Directors Forum of The Sri Lanka Institute of Directors (SLID) together with the Women Corporate Directors (WCD) Sri Lanka Chapter recently organized a webinar on Sri Lanka’s Economy: ‘The Next 6 Months’ to understand what the next 6 months will hold for Sri Lanka under different political and debt scenarios.

Macro Economic Analyst Head of Sector Research and Lead Anshari Perera and Chayu Damsinghe Product Head Macroeconomic and Thematic Research of Frontier Research (Pvt) Ltd were the resource persons for the session.

Anshari Perera said that the near-termeconomic outlook is very ambiguousas it is tied to the political nuances in the countryand that there can be a significant amount of volatility over the next few monthsdepending on how the situation unfolds. She added that political situation and the negotiations with the IMF are two key factors that will have a significant impact on how Sri Lanka’s economy will perform in the near-term as well as from a longer-term perspective.

“The IMF is important in bringing back confidence and improving the sentiment – particularly the foreign investor sentiment - towards Sri Lanka. From a political perspective, if we have a stable government that can continue throughout this period, it will immensely help with the IMF negotiations and the debt restructuring process.Anshari went ahead to comment that Sri Lanka is not unique in the situation it is in. Many other economies have undergone similar experiences in the past 10-15 years.”

“IMF’s importance at this juncturecan be understood by studyingthe experience other countries havehad in similar currency and debt crises and how they have manoeuvred their economies back to health with the backing of the IMF. She mentioned that countries which have continued with the IMF programme for at least two years have seen spiralling inflation fall back to below 15% andcut back on money printing with tight monetary and fiscal policy reforms such as interest rate increases and restructuring of taxes.An IMF programme will also support an inflation rate slow-down and stabilization of exchange rates” she said adding that while Sri Lanka can recover from this crisisand come out stronger like some of the other countries, the recovery will not be a “V” shaped fast recovery.

Chayu Damsinghe commented that the crisis that Sri Lanka is going through is not necessarily rare or uncommon. He mentioned that the recovery witnessed by other countries gives optimism even though the trajectory of recovery may be mid to long term. While some countries like Venezuela and Zimbabwe underwent a hyper-inflationary period, most countries recovered, some quite strongly, having undergone varying levels of pain.”

“In 1991 India experienced its Gross Fiscal Deficitrising which was financed through increased borrowings.India saw its reserves falling from USD 3.11 billion at the end of August 1990 to USD 891 million by mid-January 1991 causing massive problems across India. The economic crisis fuelled a political upheaval too with India appointing four prime ministers from 1989 to 1991.It was PM Narsimha Rao’sGovernment that was credited for having implemented the necessary reforms for India to come out of the crisis.”

“Across this period, the currency depreciated quite heavily across a series of devaluations. Interest rates were also high although not as high as in Sri Lanka” he added. 

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