As a collective overall body of exporters, we have been at the forefront of sustaining employment and guaranteeing a regular movement of foreign trade, even amidst the most critical economic downturns faced by our country. Our membership handles the greater part of goods exports, which account for some 13% of Sri Lanka’s GDP. Today, we stand united in urging the authorities to handle the pressing challenges posed by the appreciation of the Sri Lankan Rupee (LKR) towards the US Dollar (USD), even further compounded by restrictions on the movement of overseas currency involving business banks, and the necessary conversion of export earnings into Sri Lankan Rupees.
Impression of Rupee Appreciation
The appreciating Rupee has experienced a multifaceted unfavorable impact on our business. A stronger Rupee signifies our products turn out to be additional highly-priced for international purchasers, specifically affecting our competitiveness in the international market. The trade price peaked at around Rs. 364 for each USD in May well 2022, which led to increased operational costs, powerful us to modify our charge foundation in line with greater inflation skilled in the state. The rapid appreciation of the Rupee, with costs slipping down below Rs. 300 for every USD given that March 19th, has put us in a precarious place, threatening the sustainability of our enterprises and the livelihoods of all those we use. Irrespective of the appreciation of the Rupee, the charge of residing stays significant, continuing to level tension on employee wages.
The timing of the Rupee’s appreciation coincides with weak world-wide demand from customers for the majority of our goods exports and intense opposition from competing countries. Aspects this sort of as global inflation and geopolitical tensions have continued to have an effect on sentiment and obtaining power in the key markets of our items exports.
Background to the appreciation of the Sri Lankan Rupee
The distressing financial stabilization approach applied with major financial and fiscal policy actions by way of coverage fee, inflation, and tax adjustments import controls and financial debt support suspension, has had the sought after influence to constrain financial activity and, in switch, alter and constrain import need. At the similar time the collective efforts of the Governing administration, export group, tourism marketplace and remittances have continued to have a optimistic influx and increase foreign reserve positions to extra relaxed stages.
This is in the backdrop of the amazing situations when the credit card debt servicing by the country continues to be at a standstill, which is a momentary situation.
All through the height of the crisis, the Central Financial institution of Sri Lanka implemented a policy for exporters, by Gazette No.2251/42, dated Oct 28, 2021, to mandatorily convert overseas exchange receipts as a short term measure. This coverage enforced the conversion of all repatriated export proceeds into Rupees inside a stipulated timeframe, except for specified exempt payments. The exporters do not have the flexibility to system the conversion as for every hard cash stream wants or decision of bank, usually forcing conversion at an overvalued trade price, and inserting more strain on our export operations.
Revisiting Guidelines in a Transformed Economic Landscape
It is vital to identify that the landscape of our foreign exchange reserves has drastically remodeled and the ongoing enforcement of the necessary conversion policy, looking at the present-day positive reserves, is counterproductive. Persisting with this strategy has placed exporters at a market downside and pressured them to run on an unleveled actively playing subject, eroding their competitiveness. It even more functions as and is seen as an anti-export plan evaluate. Export-led recovery requirements to be prioritized to make certain the inflow of very important export earnings and to stimulate investments in the foreseeable future.
Call for Plan Reevaluation
In light of these criteria, we urgently ask for the Central Financial institution to revisit and repeal the aforementioned Gazette, in alignment with the evolving financial context. This attractiveness is manufactured with a eyesight in direction of fostering an atmosphere that not only allows but actively supports the development and competitiveness of Sri Lanka’s exports. By addressing these plan concerns, we can lay the groundwork for sustainable financial advancement, protected employment for our citizens, and make certain the continued prosperity of our nation.
We invite the Authorities of Sri Lanka to be part of us in having decisive motion in the direction of these ends. Together, we can chart a study course in the direction of a brighter, additional resilient future for the Sri Lankan export sector and, by extension, our economic system at huge.
Signed,
Exporters Affiliation of Sri Lanka
Joint Clothing Affiliation Discussion board of Sri Lanka
Nationwide Chamber of Exporters
Tea Exporters Affiliation
Sri Lanka Affiliation of Producers and Exporters of Rubber Goods
1st April 2024
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