Intermediate Equipment Handbook
Intech Associates
a local market, paid for in local currency revenues. Any organisation reliant on
imported equipment will be more susceptible to exchange rate depreciation and
the associated cost inflation.
1.3.3 Exchange rate fluctuations and inflation
The exchange rate of the local currency can be very volatile against the ‘harder’
currencies of the heavy equipment manufacturing countries.
In many countries the local currency has weakened considerably against these
‘hard’ currencies in recent years. The costs of imported equipment items have
necessarily risen accordingly in local currency terms. The depreciation of a local
currency feeds a substantial amount of inflation into the local economy. The
prices of items such as imported equipment and spares are particularly related to
these currency movements.
This has an effect on road sector budgets and operations, particularly for
replacement of heavy plant fleets, procurement of spares for the existing heavy
equipment fleets, securing adequate finance for heavy equipment operations,
and keeping equipment charge rates up-to-date.
Any organisation which took out a foreign currency loan to finance equipment
purchase before such a currency depreciation, would have experienced their
interest payments rise correspondingly.
Even if heavy equipment was procured and paid for prior to the exchange rate
deterioration, the owner would be facing corresponding increases in costs of
imported spares for heavy equipment.
The currency risks and effect on equipment costing are substantial.
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