By Ashwin Hemmathagama – 

Our Lobby Correspondent

The Government on Tuesday rejected the Joint Opposition’s charges that economic policies have eroded investor confidence leading the Colombo Stock Exchange to crash significantly last year and to witness a net foreign outflow of Rs.5.3 billion.

Minister of National Policies and Economic Affairs Niroshan Perera responding to a question for Oral Answer raised by Joint Opposition MP Udaya Gammanpila highlighted a list of macro and micro economic factors which contributed to a volatile market condition.

 “This net foreign outflow was due to many global factors including the present world economic crisis, the spillovers from China to other economies, an increase in interest rates by the US Federal Reserve and a continuous decline in the oil prices. As a result of these factors foreign investor exited investment in stock markets and in emerging markets in particular and moved to investments that generate fixed income. In the Sri Lankan scenario speculation that interest rates will climb higher has affected the performance of the CSE,” the Minister clarified.

According to the Minister, the Net Foreign Outflows in 2010 and 2011 has been Rs.26.3 billion and Rs.19 billion respectively. “Both these outflows were witnessed in the post war period. Rs.26.3 billion is the highest ever net outflow in the history of the CSE. Are you suggesting that in the year 2009, 2010, and 2011 investor confidence in the economy and the economic policies of the country was eroded? Besides, during certain periods where net foreign investments recorded positive figures, shares had been purchased by Sri Lankans using foreign accounts,” added Minister Perera who reminded the House the situation during this period forced SEC Chairman Thilak Karunaratne to resign from his post unable to investigate the malpractices and take action against the culprits.