Authorities were warned of a balance of payments crisis since June last year, but the Central Bank had repeatedly denied such a problem and was selling down reserves to keep the exchange rate at an artificial level despite the widening trade deficit. Last February, the bank, and the government, could no longer ignore the problem and a slew of policy measures were adopted to contain the balance of payments problem after a serious erosion of the country’s reserves.
With the Monetary Authorities reported action in permitting the Sri Lanka Rupee to "float", the last quarter of 2011/2012 saw a very rapid depreciation of the Rupee by about 13.4%. This unexpected development had an adverse effect on all business entities that are import dependant including importers of raw materials for value addition. Although these policy changes had a short term impact on market volatility these measures will no doubt bring about an improvement in the current account deficit and external reserves," Wijetilleke told shareholders of Sunshine Holdings PLC, of which he is Chairman.
"We are of the view that these measures should have been taken earlier, which could have then cushioned the short term negative effects. From a social point of view the government is expected to mitigate the adverse effects of price increases in electricity, petroleum etc through appropriate relief measures to the more vulnerable sectors which are nevertheless critically important for the economy. Measures taken to restrict imports of non-essential items such as vehicles etc., too was inevitable in the current scenario," he said.
"Sri Lanka’s economy sustained its post-war momentum, by recording a growth rate of 8.3% in 2011. This achievement surpassed the record growth rate achieved in the previous year. This impressive result was achieved in midst of several political and economic challenges in the global environment that involved economic meltdown in Europe and geopolitical turbulence in the Middle East.
"These global factors had an adverse impact on Sri Lankan market, especially the exports, vis a vis the garment and the plantation industries. The rising oil prices too caused a severe imbalance in the country’s trade deficit and balance of payments. Although the oil prices were coming down in the recent weeks, the pressure on the price stability is likely to be a strain on our balance of payments in the current year as well. The Authorities have understandably effected a downward revision of the GDP growth for 2012 to 7.2% from the earlier estimate of 8%," Wijetilleke said.
"The pace of infrastructure development, especially in thrust areas of the economy such as Tourism have been encouraging and we remain confident that Sri Lanka is moving in the direction of realizing its true potential," he said.