Sri Lanka: devaluation and the IMF

Sri Lanka announced a shock 3 per cent currency devaluation on Monday in an attempt to boost export competitiveness and keep the country’s paymasters at the International Monetary Fund happy.

Mahinda Rajapaksa, who is both president and finance minister, made the announcement to parliament while presenting the 2012 budget. His speech – interrupted when ruling party politicians attacked protesting opposition members – included a projected 14.15 per cent increase in spending and a narrowing budget deficit based on increased revenues.

“We need to reduce the import cost and increase export revenue. When our currency has strengthened, our trading partners’ currencies have depreciated. So I propose to devalue the currency by 3 per cent with effect from today,” Rajapaksa said, according to Reuters.

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