Biz frustrated over stressors on exchange rate
Frustrated businesses are starting to relocate while certain foreign investors are pulling the plug on intended investments or rethinking their strategies in Sri Lanka, industry officials say.
“It’s the worst of times,” a top CEO of an exporting company told Business Times on Wednesday. A senior banker confirmed this noting that certain foreign investments have pulled out already on account of the exchange rate uncertainty and overall inconsistencies in the country’s economy.
A CEO of a private bank told the Business Times that a premier condiments exporter and another exporter of electronics are trying to relocate most of their businesses elsewhere. “They intend to start the relocation process by next year. These are people who really believed the Sri Lankan growth story,” he said. A managing director of a large trading business pointed out that businesses cannot plan for the next year with such a state in the economy. “We can’t plan our day-to-day banking transactions for example. How can we forecast for the next year?”
The bank CEO said his bank is struggling with dwindling inward remittances because of the unrealistic US dollar exchange rate. “The inward remittances have dried up. They are using alternative channels to send money. Exporters are also withholding money from being sent to Sri Lanka. Overall, the banks’ trade business will be heavily impacted by the exchange rate crisis.”
The senior banker said that they prioritise opening letters of credit (LCs) for medical expenses and student transactions. “Otherwise, we hardly open letters of credit.” He added that when a chairperson of a company had called him recently to help out with opening an import LC, he had to turn it down and request him to speak to the banking regulator to issue dollars.
An industry official pointed out the artificial dollar rate of Rs. 203 by the Central Bank isn’t helping any business. “The artificial rate is a breeding ground for the black market. There are so many dollars to buy at Rs. 240. We cannot be in denial of this.”
A CEO of a large manufacturing company pointed out that already the real dollar rate is reflected in the goods and services already. “So, maintaining the artificial rate is detrimental in every way.”
An economist pointed out that the recent visit to India to discuss a US$ 500 million credit line to buy fuel by the Finance Minister Basil Rajapaksa if successful will be enough for nearly two months of fuel. Businesses are hyperventilating in this situation. “Something has to be done and fast,” he stressed.
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