NCE proposes assistance to sustain export sector utilising resources of EPF

Sri Lanka is currently fighting a global pandemic and enduring a challenging period both in terms of healthcare and an economic upheaval. It is obvious that businesses are struggling to maintain the normalcy but to no avail. It is evidenced that exporters are experiencing dual supply chain shocks, where some cannot receive raw materials and some cannot secure orders from clients due to the lockdown in other countries.

This has resulted in halt of production, many businesses reaching a critical juncture. Further, some of the exporters are facing issues with cancelled pre-orders on already manufactured batches of products in terms of the economic slowdown around the world. This trying situation presumably will lead to high levels of retrenchment such as employee redundancy and to the extreme extent of complete shutdown of business ventures. Many parties and lobby groups are bringing forward many suggestions some of which can be implemented whereas some are not practical solutions. 

In this light the NCE proposes that the President explore the option of opening up Employee Providence Fund (EPF) as a loan provider, to the employees in the form of salaries for several months, until the exporting businesses could stand on their own. The suggestions are of dual form, from which the most feasible and suitable could be followed.

The NCE suggests that EPF funds are released to the employees (staff) as a loan covering their monthly salaries for the months March to August. This mechanism is to be strengthened with commercial banks acting as the administrator. The employer (exporter) submits the payroll to the bank who in turn obtains the funds from EPF and credits the salaries to the employee’s (staff) accounts. Prior to doing so, the bank will ensure necessary credit checks/guarantees are obtained from the employer (exporter). The employer (exporter) will act as the guarantor to the loan given by EPF to the employee (staff) and be liable for repayment of same. 

An alternative model suggested, is the commercial banks grant a credit facility exclusively to employers (exporters) to pay their employee (staff) salaries covering the period March to August. The employer (exporter) submits the payroll to the bank, whom in turn will credit the employee (staff) accounts with relevant payments.  

It is suggested that re-payment of loan be completed within 24 months of granting with an interest component of 6% for EPF and 0.50% margin for the bank totalling 6.50% p.a.

Further as another option, the NCE also requests the Central Bank to direct the commercial banks, who have been top performers during the past few years to provide loans to the exporters at concessionary interest rates, in the situation the EPF cannot be utilised as a means of providing loans, and for their working capital management requirements. 

Their proposal is to protect industries; especially the exporting companies, who are the life blood of the economy, with the potential to create inflows of foreign exchange in this critical need. It is assured that our exporters will repay the Government once they are strong in their operations. Further it is important that they are given the right amount of assistance to support the Government to retain the employment levels of the country, as unemployment will not only bring economic consequences, but also has an impact on the social and mental wellbeing of the country. Therefore, NCE highlights the need to support the exporters in this hour of need.