CBSL’s arbitrary exchange rate cap comes under fire

Tuesday, 7 December 2021 02:25 - - {{hitsCtrl.values.hits}}

The Central Bank’s arbitrary cap on the exchange rate came under fire yesterday at the Ceylon Chamber of Commerce Economic Summit Day 1.

In response to a participant’s question on whether the private sector is comfortable with the fixed exchange rate, John Keells Holdings and Ceylon Chamber Deputy Chairman Krishan Balendra was blunt in saying it was not favourable.

“The foreign currency shortage is having a great impact on the business, irrespective of the type of business on imports and exports. Our construction and importing trading businesses are being disrupted and other measures that have come around have made it even worse. Overall, it’s negative,” Balendra told the Economic Summit.

Hemas Holdings PLC Group CEO Kasturi Wilson said the CBSL move was counterproductive too in terms of key priority – boosting exports.

“If you want to grow exports you can’t hold that position. Exports have to be competitive. You’ve to hit the bullet at one point. You’re not going to get FDIs if you’re going to hold that stance. The view here is the concern on the impact on inflation and cost of wages?? But also the debt repayment,” she said.

“Our macroeconomic conditions are bad and Balance of Payments is struggling. Irrespective of the bank rate or informal rate, there is no access to funds. Eventually it has had an impact on all of us as importers. Impacts on our supplies and the policy consistency itself is an issue. I think we need to take a step back and restart the real macroeconomy in the correct direction,” Kasturi added.