Trade deficit will increase to US$ 13 bn. by December - Eran

* State capitalist economy incapable of bridging investment gap


by Zacki Jabbar

Despite various predictions by the government, the trade deficit would widen by the end of this year, financial analyst and UNP Parliamenterian Eran Wickremeratne predicted yesterday.

He told The Island that as at the end of 2011, the trade deficit was nearly US$ 10 billion and it would appreciate by around 30 percent by the end of this year.

Exports will take some time to pick up, tea prices will drop, imports would cost more and oil prices are bound to increase further by December, the MP observed.

Wickremeratne said that even if remittances and revenue from tourism were to increase by a total of 70 percent and Foreign Direct Investments was to double to US$ 2 billion in comparison to last year, the Rajapaksa regime would be nowhere close to bridging the trade deficit.

Asked how the rupee would perform in the medium to long term against the US dollar, he said that it will appreciate slightly in the short term, but by the end of the year it would have depreciated way beyond current levels.

The rupee had picked up slightly in the last few days, because it was common knowledge that the IMF’s next loan instalment to Sri Lanka had been approved for disbursement. The monetary authorities would be able to prop up the rupee for some time, but will not be able to sustain it for too long, the MP said.

Asked what should be done to give a turbo boost to the economy in the post war era, Wickremeratne said that the government should restore international confidence in Sri Lanka. This would require implementing the rule of law and resolving the political issues that have stemmed from the recently concluded UNHRC sessions.

The State Capitalist Economy, that was in force, was not capable of bridging the gap in investments. The private sector has to be invited to invest in key sectors and given all the necessary incentives if there was to be meaningful economic development that filters down to the poorest of the poor, he added.

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