The large inflow of remittances and major and sustained spurt in software exports coupled with capital inflows have the potential for possible overvaluation of the currency and the resultant erosion of longterm competitiveness of other traditional and goods sectors – popularly known as the Dutch disease.
Given the fact that more people are in the goods sector, the human aspects of the exchange rate management should not be lost sight of. Therefore, the Dutch Disease syndrome has so far been managed by way of reserves build-up and sterilisation, the former preventing excessive nominal appreciation and the latter preventing higher inflation.