Brexit boosts Lanka’s foreign reserves: Ravi K

Minister of Finance Ravi Karunanayake says despite the negative impact Brexit, UK’s departure from the European Union, has on the world, Sri Lanka has seen a benefit with an upward movement in foreign reserves.

Speaking in parliament Yestersday, the Finance Minister said that following Brexit last month, foreign reserves have increased by $ 250 million and now stand at $ 6.1 billion.

"Foreign reserves have gone up by about 250 million US dollars during these two weeks. Now the reserve position is at 6.1 billion US dollars," he said adding that the country now has reserves sufficient for 4 months of imports.

According to Central Bank data Sri Lanka's foreign currency reserves at end of May stood at $ 5.645 billion.

"We can see that there is an advantage in Brexit to Sri Lanka," Karunanayake said affirming that country's foreign reserves are not at risk following Brexit. He expected the most volatile period to last about two months.

Minister Karunanayake said the government has been handed over a "knelt-down economy" from the previous government and the country's revenue was insufficient to pay off these debts.

One of the solutions to reduce the debt burden is to convert the short term loans, which were taken by the previous government at high interest rates, and transform into long term debt with low interest rates.

Minister Karunanayake added the government is doing as much as it can to bring dollars into the country.

The Minister assured that the country has sufficient funds for future development work and has received more funds from Japan, China, and India for development projects.

However, the government cannot pay off the past debt from the development funds, the Minister explained adding that the government needs to increase the revenues through some form of tax either VAT or NBT (Nation Building Tax) to pay off the debt.

The Minister criticised the joint opposition for misleading small businesses to protest against the VAT, which was increased from the 12% during the previous government to 15% now. He said the big businesses, who evade paying the taxes due to the state are the ones protesting the VAT increase.

Small businesses that have a turnover of Rs. 33,000 per day or one million rupees per month are exempted from VAT.

France overtakes Britain as world’s No. 5 economy after pound drops

Reuters: France and Britain were vying for fifth place on the list of the world’s biggest economies on Wednesday, with France nudging ahead after a renewed slump in the pound in the wake of the Brexit vote, Reuters calculations showed.

Britain’s gross domestic product stood at 1.864 trillion pounds in 2015, according to the last available figures from the International Monetary Fund.

The average exchange rate for the year in question is commonly used for comparisons between countries. But using the current exchange rate, France has pulled slightly ahead.

With the pound falling below 1.17 euros overnight for the first time since 2013, that means the size of the British economy in 2015 is now equivalent to 2.172 trillion euros – less than France’s official GDP of 2.182 trillion euros last year.

Britain’s vote in a referendum on June 23 to quit the EU has hammered financial markets, rattled businesses and punished the pound, which was trading at 1.1650 euros as of 1440 GMT.

But volatile exchange rates meant the figures were hard to pin down. Britain briefly regained fifth spot after the pound broke above 1.17 euros for a few hours on Wednesday, only to sag again in mid-afternoon trade.

Britain and France, which have similar populations, have swapped positions before in the rankings.

In 2014 Britain overtook France, six years after the financial crisis caused the pound to fall and allowed France to regain a crown it had lost in 1997.