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Rupee: To depreciate or not to depreciate

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The intention of the government was to reduce imports and encourage exports. The policy document, ‘Vistas of prosperity and splendour’ page 36 refers to reducing the trade deficit and go for import substitution and encourage exports. So, the general public have expected imports to come down in 2021. In fact, the imports have gone up to US$ 20.6 billion in 2021. This may be partly due to the fixed exchange rate policy of having relatively lower value for US$ in rupee terms and high international prices of commodities. The trade deficit has also increased to US $ 8 billion as export revenue was US$ 12.5 billion, which is an increase from 2020 and 2019 export figures of US$ 10 billion and US$ 11.9 billion respectively.

I give below actual expenditure on Imports of selected consumer food items (In US$ million): (See Table 1)

It is also evident from the Central Bank data published, the spending on import of vegetables incl. onions, potatoes, which was US $ 353 million in 2020 has further increased to US $ 384 million in 2021. The Country has spent some US $ 1.4 billion on these four items of imports which is more that the export revenue from Tea (US$ 1.3 billion) How did Sri Lanka manage to bear this high import bill and finance the deficit?

Our foreign exchange revenue was not enough and, therefore, we were compelled to borrow funds through foreign loans and have also used our valuable foreign exchange reserves to pay for these imports and to repay foreign loans amounting to US$ 6 billion. In 2021, the FDI figure is only US $ 560 million and foreign remittances are also US$ $ 5.5 billion only. If this trend continues, our obligations on foreign debt will increase further.

Compared to other regional counterparts, Sri Lankan export performance has been declining. Exports as a % of GDP has been declining during the last 12 years. The export performance reflects 26% of the GDP during the two decades ending 1999 in 1980’s and 90’s. However, the next two decades commencing 2000 to end 2019, the export performance of Sri Lanka has drastically declined to 16% of the corresponding GDP figures. (See Table 2 – How trade deficit widens during the four decades (Annual Average in US$ billion)

As can be seen, our trade deficit during the period 2010 to ‘19 has widened to 78% of total exports and our exports as a % of GDP has also decreased from 28% during the period 1990-99 to 14% during the ‘10 years period’ of 2010 to ‘19. In fact, it was an average of only 13% during the period 2015 to ‘19.

The exchange rate policy has created competitiveness issues for exporters, as external trade counterparts have become more competitive at the global market place due to their currencies getting depreciated at a faster rate. We would like to see our rupee getting strengthened but reality is because of continuous trade deficits, our rupee has been depreciating. If the $ is artificially controlled and fixed at Rs 202/ then it’s an encouragement for importers to buy $s even at higher rates from the black market and arrange import of goods. This is because they know that in future, the rupee will further depreciate.

The exporters will also discourage themselves to convert $ at this rate. As a result, now some exporters have become indirect importers outside the banking system, some get extra Rs 25 per US $ from importers outside the system. However, allowing rupee to float freely depending on market forces (will automatically depreciate the rupee further) will also create serious issues such as revaluing the foreign debt portion and the book value of the debt servicing will go up and thus increasing the budget deficit further. The cost of living will skyrocket, as the imported goods will cost more, nevertheless it’s a disincentive to go for non-essential imports and encourage to look for domestic alternatives.

As I mentioned, the intention of the government was to curtail and reduce import expenditure and encourage exports, however, both the current account deficit as well as government budget deficits are ever increasing. From the above economic indicators, it can be seen that during the last seven years, the economic situation got severely affected, out of which during the last two years, it was mainly due to Covid-19, quite apart from structural weaknesses.

No FDIs nor foreign remittances will flow in without addressing those structural weaknesses in the macroeconomic fundamentals- if not inflation will skyrocket and banks are compelled to raise interest rates as well. Foreign inputs such as fossil fuel and fertiliser need to be partially replaced with domestically sourced materials and other inputs as far as possible. It is in that context only the Presidents renewable energy initiatives and green natural agriculture methods need to be viewed. India and Kenya and many other countries have also decided to follow these initiatives in order to address ever increasing social and environmental costs associated with not adopting mitigating strategies to overcome climate change ill effects globally.

It is necessary to keep a close tab on spending foreign exchange on non-essential imports every month. The government needs to deploy people including our armed forces in the agriculture sector and farming activities coupled with appropriate technology and increase domestic production utilising our arable underutilized agricultural land based on a carefully prepared crop calendar for different districts.

Jayampathy Molligoda



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Opinion

Lankan hotels and price discrimination

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In planning a long trip to Sri Lanka from the UK, I was disappointed to see different hotel pricing for foreign visitors when compared to local rates. Like many travellers, I prefer to book directly with hotels, rather than international hotel consolidators, as more money goes to local businesses. But the assumption that foreigners should pay more is simply distasteful. As such, I’ve chosen another long-haul destination that does not follow such practices, and hope that Sri Lanka will change its approach to overseas visitors in the near future.

Neil Roskilly Wetherlee UK

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Opinion

When will this craziness end?

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Trump with his ‘FIFA Peace Medal

We are living in ‘Trump times’ characterised by never ending craziness but it is not confined to the USA alone. I will come to our part of the world later. As a large part is due to Trump, perhaps, normalcy may return when he ends his second term on 20th January 2029, at 12.00PM Eastern Standard Time. We cannot be sure of that either because the ‘Great man’ may decide to govern the world for ever, after having purchased Greenland and forcing Canada to be the 51st state of the US!

Trump had an unprecedented opportunity, being only the second to be elected to a non-consecutive second term as the US President, the other being Grover Cleveland at the tail end of the nineteenth century. If only he kept to his campaign promises, his name would have been written in history in golden letters but the complete transformation, following the election, is likely to make his name go down as one of the craziest!

It is a moot point whether even Trump knows what he is going to do that day, when he wakes up, considering the illogicality of some actions, best illustrated by the ad-hoc imposition of tariffs without any discussions or negotiations. The adverse effects of these, to the world economy, is yet to be seen compounded, of course, by the continuing war with Iran. He promised to be a ‘Peace-maker’ but turns out to be a war-monger, like many of his predecessors! His excuse was that he went to war because he was denied the Nobel Peace Prize.

Well, he got the FIFA Peace Prize from FIFA President Gianni Infantino, another shameless leader who is ruining the ‘Beautiful Game’. When a US team member was given the red-card, Trump, who claims to know better than referees, decided it was not so, with a successful appeal to Infantino. During the next World Cup match, Belgium, supercharged with this injustice, thrashed the USA team 4-1.

Even the Semiquincentennial celebration of the US was not about the country but about himself! In fact, a cynic may point out that most of what the US has left behind, over the 250 years, is death and destruction. Paradoxically, whilst fighting a war with Iran to prevent it acquiring nuclear capabilities, the US is the only country to have dropped Atom Bombs, not one but two. Even though Japan was on the verge of admitting defeat, ‘Little Boy’, a uranium-based bomb, was dropped over Hiroshima on 6th August, 1945. Not giving time for Japan even to consider surrender, the second ‘Fat Man’, a plutonium implosion bomb, was dropped over Nagasaki, just three days later. Why did the US drop two A-bombs in rapid succession? It was to test the two different types of bombs they had.

Over the past 250 years, the US has started wars in many countries and, in most instances, lost leaving behind a trail of devastation and destruction. In spite of all that, it is continuing its war with Iran, a war that was started with false intelligence supplied by the war-monger Netanyahu who predicted the instantaneous fall of the Clerical regime in Iran. This war has turned out to be a blessing in disguise for Iran, as it realised the economic value of the Strait of Hormuz. The language Trump uses in reference to Iran is despicable. What sane person, nay a world leader, refers to flattening of a country and erasure of a civilisation?

Back in Sri Lanka, we know that most of our modern-day politicians are also self-serving. They are also very good at amassing wealth, when in power, just like the Trump family had done. However, what is of concern is the rapid decline in the standards of some vital professional classes. Special reference has to be made to the Attorney-General’s Department. Perhaps, the present holder is a decent man but some of his predecessors brought the high position into disrepute.

Dappula Livera allegedly concocted a conspiracy theory about the Easter Sunday terror mastermind as President Gotabaya Rajapaksa denied him an extension in service as the Attorney General. If he has any information about such a conspiracy, it is his bounden duty to come out with facts but has not done so.

A remark recently made by Deputy Solicitor General Dileepa Pieris about gallantry medals awarded to military personnel is said to have caused an affront to the dignity of Air Force officer Shantha Jayathilleke, who has received the highest decoration awarded to a living officer and sought to represent the interests of former Director of State Intelligence Service Maj. Gen. (retd.) Suresh Sallay as permitted by the Penal Code.

When political leaders and professionals holding high office behave in this manner, is there any hope for the nation?

By Dr. Upul Wijayawardhana

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Opinion

Prime Minister’s contribution to education reforms

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PM Dr. Amarasuriya

Education has always been one of the strongest foundations of Sri Lanka’s social and economic development. In today’s rapidly changing world, however, education must prepare students not only for examinations but also for life, employment, innovation, and responsible citizenship. Recognising this need, the government of Sri Lanka has introduced a new programme of education reforms. As Prime Minister and Minister of Education, Higher Education and Vocational Education, Dr. Harini Amarasuriya has played a leading role in guiding and promoting these reforms, with the aim of creating a more inclusive, modern, and student-centered education system.

One of the Prime Minister’s most significant contributions has been providing a clear vision for transforming the education system. Rather than focusing only on examination results, the reforms seek to develop students’ creativity, critical thinking, communication skills, problem-solving abilities, and emotional well-being. This approach recognizes that success in the twenty-first century requires a broad range of skills that go beyond memorisation.

A major feature of the reforms is the introduction of a new curriculum. The Prime Minister has emphasised that revised syllabuses will be introduced in stages, beginning with Grades 1 and 6, before expanding to other grades over the following years. The updated curriculum is designed to make learning more engaging, practical, and relevant to modern society. It encourages inquiry-based learning, teamwork, creativity, and the application of knowledge to real-life situations rather than relying solely on textbook learning.

Teacher development has also been identified as a key priority. The Prime Minister has repeatedly stressed that meaningful reforms cannot succeed without well-trained and motivated teachers. As a result, the government has planned professional development programmes to help teachers understand the new curriculum, adopt modern teaching methods, and integrate digital technology into classroom instruction. Strengthening teachers’ skills ensures that students receive a higher quality education and are better prepared for future challenges.

Improving school infrastructure is another important contribution under the Prime Minister’s leadership. Many schools across Sri Lanka continue to face shortages of classrooms, laboratories, libraries, and digital learning facilities. The reform programme aims to reduce these disparities by giving priority to improving physical infrastructure, upgrading learning environments, and ensuring that children from rural and urban areas have more equal educational opportunities. These investments are expected to create safer, more effective, and more inclusive learning spaces for all students.

The reforms also place strong emphasis on digital education. As technology continues to shape every aspect of modern life, students need digital literacy to succeed in higher education and future careers. The Prime Minister has supported initiatives to expand the use of digital tools in teaching and learning while encouraging schools to make greater use of educational technology. By promoting digital learning, the reforms seek to narrow the technological gap between schools and prepare students for a knowledge-based economy.

Another noteworthy contribution is the promotion of vocational and skills-based education. Traditional education has often placed greater emphasis on academic achievement, while practical skills received less attention. The new reforms aim to change this balance by introducing vocational subjects within the school system and creating clearer pathways for students who wish to pursue technical and vocational careers. This approach helps students develop employable skills while supporting the country’s economic growth and workforce needs.

The Prime Minister has also encouraged a more balanced approach to student assessment. Instead of measuring success only through final examinations, the reforms seek to include continuous assessment, classroom activities, projects, and practical learning experiences. Such an approach recognises different learning styles and provides students with more opportunities to demonstrate their abilities. It also reduces excessive pressure associated with high-stakes examinations and supports the overall development of children.

Inclusivity is another important aspect of the Prime Minister’s contribution. The reform process has involved experts, educators, and advisory committees representing diverse communities. The government has emphasised that curriculum development should reflect fairness, inclusiveness, and respect for Sri Lanka’s multicultural society. By involving different stakeholders in the planning process, the reforms aim to build a national education system that serves all children equally.

Despite these promising initiatives, implementing large-scale education reforms is not without challenges. Teacher training, infrastructure development, adequate funding, and effective monitoring are essential for the long-term success of the programme. Public awareness and cooperation among parents, teachers, school administrators, and policymakers will also play a vital role in ensuring that the reforms achieve their intended outcomes. Sustained commitment from the government and continuous evaluation will be necessary to address emerging issues and improve implementation over time.

The Prime Minister of Sri Lanka has made a significant contribution to the country’s new education reforms by promoting a modern, inclusive, and future-oriented vision for education. Through curriculum modernization, teacher development, improved infrastructure, digital learning, vocational education, and better assessment methods, the reforms seek to prepare students not only for examinations but also for lifelong learning and responsible citizenship. If implemented successfully, these reforms have the potential to strengthen Sri Lanka’s education system, reduce inequalities, and equip future generations with the knowledge, skills, and values needed to contribute positively to national development in an increasingly competitive global environment.

Saumya Aloysius
saumyaaloysius@gmail.com

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