CB draws up action plan for govt. in view of Brexit

By Saman Indrajith

The Central Bank on Saturday submitted an action plan to the government detailing measures to be taken in view of Britain’s exit from the European Union.

The Action Plan handed over to President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe had been prepared by the Financial Research Division of the Central Bank on the instructions from Governor Arjuna Mahendran, government sources said.

The nine-page Action Plan outlines the strategies and steps the Sri Lankan government should take in view of forthcoming unprecedented changes expected in Europe. The EU has been Sri Lanka's largest export destination absorbing 36% of its exports. Of Sri Lanka's export to the EU, around 40 percent is sent to the UK.

The UK voted to leave the EU by 52 to 48 per cent in Thursday’s referendum. The impact of the latest change on Sri Lanka had been analysed and the securing the GSP plus subsidy in the new context had been addressed in the Action Plan, sources said.

Action Plan has predicted that Sri Lanka may suffer blows in trade relations with the EU and the UK in areas including trade, tourism and investment. It also warns that there would be a global economic downturn in the aftermath of the UK's exit from the EU.

British Sterling Pound would lose its value drastically against the US dollar. Sterling dropped as much as 11% against the dollar after the vote, hitting 31-year low following the referendum results. With the release of Thursday's referendum results several leading stock markets crashed.

One of the main stock markets which suffered was the Japanese Stock Exchange. The Dow Jones Industrial Average dropped 3.4% on Friday, the largest decline for the index since August. The Stoxx Europe 600 index shed 7%—its steepest drop since 2008, while Japan’s Nikkei Stock Average fell 7.9%.

It is expected that the process for the UK to complete the exit from the EU would take at least two years, says the Action Plan which made five key suggestions to the Lankan government to implement to avoid repercussions detrimental to the national economy.

The Action Plan would be referred to the Cabinet Sub Committee on Economic Affairs within this week, government sources said.

www.island.lk