Sri Lanka calls for global coalition to tackle rising dollar

A U.S. Dollar note is seen in this June 22, 2017 illustration photo. (Reuters)
Updated 23 October 2018
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Sri Lanka calls for global coalition to tackle rising dollar

  • The island’s currency bottomed out at a record-low 174.12 rupees to the dollar
  • The rupee has shed more than 12 percent of its value this year and Sri Lanka fears it could slide further

COLOMBO: Sri Lanka on Tuesday called for a “coalition of the willing” to help stabilize free-falling emerging market currencies around the globe, as the beleaguered rupee slumped to fresh lows.
The island’s currency bottomed out at a record-low 174.12 rupees to the dollar, resisting a slew of measures by policymakers to arrest its steady decline.
The rupee has shed more than 12 percent of its value this year and Sri Lanka fears it could slide further as US sanctions squeeze Iran, the island’s chief source of oil.
A stronger dollar has made it difficult for emerging markets to repay debts and battered global currencies from Turkey to India and Argentina.
Finance Minister Mangala Samaraweera invited those nations experiencing currency crises to visit Colombo and hash out a strategy.
“The rise of the dollar is having a serious impact on our currencies. We are not the only one affected,” he told reporters in the Sri Lankan capital.
“I want to build a coalition of the willing to deal with this problem. I don’t see the global situation improving any time soon.”
Washington pulled out of a landmark 2015 nuclear deal with Iran in May and has been reimposing punishing sanctions on the Islamic republic, targeting in particular its financial system.
Iran not only supplies Sri Lanka with most of its oil, but is one of its chief buyers of the island’s celebrated tea.
Samaraweera has warned that blockading Iran will have ripple on effects on Sri Lanka, which has been unable to stop the rupee from nose diving.
Last month, Colombo curbed its state institutions and public servants from importing cars to reduce the outflow of foreign capital.
Banks were also ordered to restrict lending for purchasing overseas and consumer goods, but the rupee has continued its decline.
In August, the government substantially increased taxes on small cars to discourage imports, but officials said there was still pressure on foreign exchange reserves to finance big-ticket imports.


Singapore woes ring trade alarm bells

Singapore has long been viewed as a barometer of the global demand for goods and services. (AFP)
Updated 22 July 2019
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Singapore woes ring trade alarm bells

  • Governments have slashed economic growth forecasts, and gauges in several countries measuring activity in the manufacturing and services sectors paint a bleak picture

SINGAPORE: A plunge in exports and the worst growth rates for a decade have fueled concerns about the outlook for Singapore’s economy, with analysts saying the figures offer a warning that Asia is heading for a slowdown as China-US tensions bite.
While it may be one of the smallest countries in the world, the export hub is highly sensitive to external shocks and has long been viewed as a barometer of the global demand for goods and services.
The affluent city-state is highly dependent on trade and has traditionally been one of the first places in Asia to be hit during global downturns — with ripples typically spreading out across the region. The latest signs are not good. In June, exports collapsed 17.3 percent from a year earlier, the fastest decline in more than six years, led by a fall in shipments of computer chips.
That followed a shock 3.4 percent quarter-on-quarter contraction in GDP in the second quarter. Year-on-year growth came in at just 0.1 percent, the slowest pace since 2009 during the global financial crisis.
“Singapore is the canary in the coal mine,” Song Seng Wun, a regional economist with CIMB Private Banking, told AFP. “And what it tells us is that it is a tough environment.”
To warn of danger, miners used to bring caged canaries underground with them as the birds would die in the presence of even a small amount of poisonous gas — signaling to workers that they should make a swift exit.

BACKGROUND

In June, exports in Singapore collapsed 17.3 percent from a year earlier, the fastest decline in more than six years, led by a fall in shipments of computer chips.

While steadily weakening growth in China is partly to blame for a slowdown in exports, analysts say the trade war between the US and China has dramatically worsened the situation.
While Singapore — a transit point for products heading to and from Western markets as well as the Asian base for manufacturers of some hi-tech goods — may be showing the strain most, negative data has emerged throughout the region.
Exports have been slipping across Asia. In India they plummeted 9.7 percent in June, in Indonesia, Southeast Asia’s biggest economy, they dropped 8.9 percent in the same month while in South Korea they slipped 10.7 percent in May.
Governments have slashed economic growth forecasts, and gauges in several countries measuring activity in the manufacturing and services sectors paint a bleak picture.
Central banks are moving to spur domestic consumption, with Indonesia and South Korea cutting interest rates Thursday, the latest in Asia to lower borrowing costs.
Singapore’s central bank is seen as likely to ease monetary policy at an October meeting, and some economists are predicting the country could fall into recession next year.
“There are no winners in this trade war. While most of the attention has focused on the trade conflict between China and the US, the damage has not been confined to these two economies,” business consultancy IHS Markit said in a commentary.