Depreciating Rupee perturbs importers | Sunday Observer

Depreciating Rupee perturbs importers

10 January, 2021

Importers who feel they have no hope of their businesses recovering to previous levels in the short and medium-term, urge the authorities not to depend only on foreign reserves but also to focus on long-term production, manufacture and value addition activities that could generate or save foreign currency which will help  the Rupee  retain its value.

“The depreciating rupee is a bigger problem than the temporary suspension of imports. Depreciation impacts all, but restrictions are on identified HS categories. “What we see now are sharp rises and the Government trying to contain it by playing with the limited reserves. That is short-term and the Sri Lankan economy is de-growing,” an importer said, adding that in a de-growing economy, holding on to foreign exchange  is  not a sound move.

He said if the country’s recession extends, reserves would be wasted on an initiative that could not be sustained or productive in the long term.

“Instead the Government must invest in long- term production, manufacture and value addition activities that could generate or save foreign currency. Only then will the Rupee retain its value,” importers said, adding that they are in this predicament due to ‘printing of money’ and distributing among people for consumption only, without any productivity. 

“I am not saying that the Government must not protect the poorest of the poor or financially support the affected small businesses. The affordable limit was exceeded by a huge margin,” an importer said.

He said, “We are an import dependent economy. Our exports depend on imports and for value addition. Hence industrial inputs must be allowed without restrictions.

“Imports constitute a considerable portion of national income by way of direct taxes and value added/turnover taxes. This got impacted and the imports based sub-economy too declined – some categories permanently, losing many self-employment opportunities.

“The only way out is to seek help from  an international donor agency in relieving debts – a moratorium, without selling national assets such as the Port’s East Terminal. If not, the current downgrading of our credit rating will continue and create long-term impact on all imports as our Letters of Credit will not be accepted causing unnecessary cost hikes at the source such as re-confirmation charges and Credit risk Insurance premia,” he said.

Importers said that at this stage, “We have no hope of recovery in business to previous levels, in the short to medium-term.”