Less impact from world financial crisis

Ananda Wedaarachchi

“Since Sir Lanka has only minor relationships with the financial institutions which are in difficulties, particularly in the USA, there will not be a significant direct impact on our economy,” said Coordinator, University of Colombo Dr. Ranjith Bandara in a seminar on “Current Global Credit Crisis” held at Trans Asia Hotel, Colombo.

He said with the increased emphasis given on the strengthening of the local economy by the present policy of Government, the country would not be affected by the world food crisis. As a result of strategic partnership with new donor countries such as Iran, the possible impact of credit crunch and weal position of the regular donors could be lower, he said.

“But in reality, due to the global nature of the current crisis, Sri Lanka will no longer be able to escape unharmed this time around. The impact will depend on the sectors in varying levels. For example there will be less tourist arrivals from European countries and that will affect the tourism sector which is already in trouble.

Rising interest rates and inflationary pressure, US dollar appreciating at the expense of the Rupee coupled with a war budget and high public sector expenditure will make things difficult for Sri Lanka.

Though the number of foreign investors is small, it might still hit the financial market here if they decide to pull out their investments,” he said. Dr. Ranjith Bandara who is also a Director-Merchant Bank of Sri Lanka said all sectors of the economy show strong performance with higher value added sectors leading the way. Services continue to expand and now represent 62.4 per cent of the economy of Sri Lanka in 2007.

Telecommunication service is also growing rapidly and financial service continued to grow among the other service sectors last year.

“Most of the sub sector in the agriculture sector achieved relatively high growth,” he said.

He said the saving-investment gap as a percentage of GDP improved and the capital and financial account registered an improvement with higher rate last year total revenue in normal term increased by 18.3 per cent compared to 2006.

Dr. Bandara said Sri Lanka has been resilient against various external shocks in the face of tsunami, droughts, floods and terrorism.

Pillar of stability is the strong regional and macroeconomic environment and continued emphasis on improving social conditions and providing business friendly policy framework, he said.

The global financial crisis and Sri Lanka seminar was organised by Merchant Bank of Sri Lanka PLC. Partner, Pricewater, House Coopers Chartered Accountants Sujeewa Mudalige and Chief Dealer, Treasury Commercial Bank of Ceylon PLC Prince Perera also addressed the seminar.