Kottamalli economist Harsha de Silva, Iligal immigrant and Bond Banda Ajun Mahendran along with Karunga puwak financial analyst Ravi K have ensured that you and the whole country pays a huge cost by their neo liberal and incompetent actions to depreciate the rupee. You lose while their henchmen win.
Here is how they have made you pay for voting them into government!
A. They depreciate the rupee exchange rate according to neo liberal policies of the West. They think it's the solution for their incompetency. They also think that the middle class is an ignorant and passive segment. So they decide to depreciate the rupee, doing so would mean that all Import costs of all consumer goods and services would increase. From milk food, dry fish, tin fish, poultry, processed foods, sugar, infant milk food, essential drugs and many other goods would all increase. As these goods do not have substitutes and are relatively inelastic. Impacting real incomes negatively.
Intermediary import goods such raw materials crude oil, kero, gas oil would now increase. The cost would have be absorbed by the government or passed on to the consumer. Here too there are no substitutes and demand for goods are inelastic.
The price increases would gradually happen now as Kottamalli economist Harsha de Silva, Iligal immigrant and Bond Banda Arjun M along with Karunga puwak financial analyst Ravi K actions have being fully endorsed by Chandrika and Ranil W.
B. The rupee depreciation does not improve export market share as we don't have control of markets or price. So export earnings in absolute terms would not increase but decrease. As the depreciation would force exporters to cut export prices as buyers would now demand it be so.
C. Speculation takes hold of the real and financial sectors. People will spend significant time managing the currency volatility as opposed to increasing productivity and focusing on market share.
D. All Rupee bonds held by foreign investors will be sold. As no one wants to hold a depreciating financial asset. This would result in an further out flow of foreign currency. Domestic Banks will incur huge losses on their investment in government bonds as prices for bonds would fall. Affecting their trading and available for sale portfolios.
F. Financing the budget deficit will now be harder. As volatility in forex markets would push debt servicing cost higher. Therefore Sri Lanka would now have to compensate by way of issuing higher coupon bonds to make up for rupee depreciation. In other words high cost of financing of budget. This is a way of disguising tax burden on to the public.
G. Significant pressure on foreign reserves as exports decline imports remain constant and outflows of bonds and equity takes place. Also note that all input cost would be directly affected by the rupee depreciation. It would slow down domestic construction industry which was the main driver of economic growth in the last 5 years. Inputs such as steel, cement, ceramic, copper aluminium and other semi and finished product would increase significantly.
H. Foreign remittance too would slow down because of the expectations of further rupee weakness in the months ahead. This would widen the balance of payments. Making it impossible to manage external finances.
The time to pay for the "Change" from the stability of MR to the instability of MY3 Chandrika and Ranil is not too far away! Sri Lanka professionals it's time that you ask serious questions about the Good Governance tag line and who is the Hora Hora Hora! For Chandrika and Ranil government have taxed you indirectly much more than any other format of TAXES. The burden placed is going to be felt for years to come. As you have lost your real income and additionally also have to pay for the higher loan cost, debt servicing and wider balance of payments outcomes.
What a Change! The pain for Change has only just
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