Exporters lobby for currency depreciation
Sri Lanka’s foreign exchange crisis has taken a new turn with exporters lobbying the government to depreciate the rupee in a bid to become competitive in their respective exports markets amid international settlements becoming a virtual nightmare for banks.
“We have requested the government to depreciate the rupee to stand at Rs. 230 for a US dollar within this year to become competitive in the export markets,” a CEO of a large exporting company told the Business Times on Monday. However, the government is not keen to do so as it will reflect on inflation in the country, a second exporter noted. “The government is holding back and managing the currency float.” The Business Times reliably learns that the going rate for US dollars at the money changers is Rs. 224. The Business Times also learned that a particular bank had changed dollars at Rs. 207 recently which moved the Central Bank to warn banks to not pay high rates for dollars. “This was done at a meeting with the bankers last week,” a banking source told the Business Times on Wednesday.
Sri Lanka’s foreign exchange crisis has intensified over the past few months with the Central Bank managing the currency float and holding a freefall of the US dollar.
The banking sector is barely getting by and denying international settlements for exporters. Meanwhile their international partners are disappointed and losing faith in the economy, jeopardising it further. “The US dollar shortfall in banks is delaying international settlements which are making the international trading companies extremely uncomfortable questioning the credibility and reputation of the economy,” a senior banker told the Business Times. He along with some other exasperated bankers insisted that the Central Bank needs to create the foreign currency business unit liquidity space immediately. “Unless tourism earnings come, we are in dire straits,” a second banker said.
The value of international trade, or export import trade by banks is at US$ 24 billion annually. Bankers say it is down by about 35 per cent. Most of this drop is vehicles and luxury items.
Analysts are confident the government will manage this crisis as it has some strategies of its sleeve. “They are opening the country for tourists, increasing export revenues, West Asian remittances are coming through, the stock market indicators are good and currency swaps with different countries are being discussed,” an analyst pointed out.