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Economy grows but exporters want Rs. devalued
Exporters are pressing the government to prevent the rupee from appreciating against the dollar and eroding the island's competitiveness overseas as the Central Bank announced an impressive 5.5 percent growth of the economy.

Exporters complained to Minister G.L. Peiris at the Exporters Forum last week and the Minister promised to take up the matter at the Economic Sub Committee meeting on Tuesday.

Exporters of Ceylon tea and garments were the worst affected by the sudden strengthening of the rupee viz-a-viz the US dollar in the recent days. Apparel exporter Lyn Fernando said exporters were finding it difficult to compete with their counterparts from China whose currency is "grossly undervalued" and which is using the exchange rate as an instrument to gain market share.

He said the Chinese currency was undervalued by 40 percent and Chinese exporters also enjoyed export subsidies that gave them an edge over competitor countries.

"In that scenario to let the rupee appreciate will hurt our exports which have not gone up dramatically," he said. "In 2001 our exports were higher than now."
Mr. Fernando said the government "must take a stand as to what strategy is to be adopted for growth."

"Successive governments always maintained that the future growth for Sri Lanka will always depend on an export-led strategy, given the small size of the domestic market, and food production. Both have been badly affected by the rupee's appreciation," he said.

The Ceylon Chamber of Commerce said the strengthening of the rupee would result in a loss of about Rs.3-4 a kilo of tea. Exporters who bought large stocks of tea in advance reported making losses while producers complain that Colombo tea auction prices have fallen.

The rupee, which for years had been gradually depreciating against the dollar, began appreciating suddenly in recent weeks and is now around Rs 94 to the dollar, up from Rs 98 previously.

The government maintains that the rupee gained strength on the back of large foreign exchange inflows given the massive aid pledges and foreign portfolio investment as well as foreign remittances from migrant workers.

The Colombo Tea Traders Association said tea exports were adversely affected by the currency's appreciation and appealed to the government to correct the situation. Meanwhile the economy grew by 5.5 percent in the second quarter of this year, the fourth consecutive quarter in which growth exceeded five per cent, and the annual growth rate could exceed expectations, according to the Central Bank.

However, it warned that though economic growth of 5-6 percent is achievable for the current year, it would not be enough in the medium and long term to overcome basic problems such as poverty, malnutrition and unemployment.

The economy grew by 5.6 per cent during the first half of the year, ahead of the 1.4 per cent growth in the same period of the previous year, the bank said in a statement on second quarter Gross Domestic Product estimates.

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