‘Visiting Sri Lanka will prove costly for British tourists in Brexit aftermath’

By Hiran H.Senewiratne

“Sri Lanka now is much more exposed to international markets than in 2008 and,therefore, would face impacts through this channel because the sterling pound has depreciated against the US dollar by 8 percent, after Brexit, and this would have a direct impact on the Sri Lanka tourism sector. Visting Sri Lanka would be more expensive for British tourists, top economist Dr Indrajith Coomaraswamy, said.

Meanwhile, Deputy Minister of Foreign Affairs Dr Harsha de Silva said: “Sri Lanka will lose the duty free benefit with the UK exiting from European Union. Then we could renegotiate a FTA with the UK, but they will have to do a whole series of FTAs with European nations and others before they get to us.

“The immediate volatility and uncertainty in currency and equity markets across Britain, Europe and Asia are at levels not seen since the 2008 financial crisis. At that time too, Sri Lanka was caught in the global storm and despite no direct impacts, suffered substantial indirect impacts, de Silva said at a recent forum.

According to the latest data, Sri Lanka exports 10 percent of its export goods to the UK (around USD 1 billion) and 28.8 percent of its exports to the EU (around USD 3 billion) would be less competitive due to depreciation of the sterling pound. If the estimates of various expert groups on the impact of Britain’s exit on the British economy are correct, the impact on the health and dynamism of the British economy will be substantial and that will, no doubt, have impacts on Sri Lanka’s trade with Britain.

Generally, in times of volatility, investors would tend to stay away from frontier and emerging markets like Sri Lanka and go to safer assets. Due to that, global interest rates will go up and Sri Lanka will find it difficult to obtain capital borrowing.

This would include the USD and any appreciation of the USD would also affect Sri Lankan exports. These conditions would create some issues in the capital market because people become risk averse. In an already volatile external environment, this poses substantial risks.