Wednesday, June 3, 2009

Sri Lanka May Sell Rupee as Post-War Inflows Increase

June 3 (Bloomberg) -- Sri Lanka may sell its currency should it gain too much as foreign aid and investments flow into the country after the end of a 26-year civil war, central bank governor Nivard Cabraal said.

“The currency could appreciate when large amounts of money come in,” Cabraal said in an interview in Colombo yesterday. “But we learnt some good lessons in 2005 post-tsunami that we shouldn’t allow these conditions to drive the economy by itself and there has to be some kind of intervention.”

Cabraal said excessive gains in the rupee could damage exports, which make up a third of the $32 billion economy and employ more than 2 million people in the island’s tea plantations and textile factories. Millions of dollars of aid after a tsunami hit Sri Lanka on Dec. 26, 2004, increased demand for the rupee, strengthening the currency by 5.4 percent the following month and halving export growth from a year earlier.

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