Harsha slams Govt. on widening trade gap

Wednesday, 10 July 2013 01:05 - - {{hitsCtrl.values.hits}}

UNP MP says Govt. is getting commercial banks to borrow in foreign currency to service state sector debt

By Ashwin Hemmathagama UNP MP Dr. Harsha de Silva joining yesterday’s debate in Parliament yesterday cited the Government’s inability to manage economy” as the key reason for the widening trade deficit and the devaluation of the Sri Lankan rupee. “Five minutes ago when I inquired, HSBC bank informed me that the US dollar was traded at Rs.134.65. Some say that rupee depreciation is good for exports but on the other hand it is not healthy for the ordinary person. The dollar was maintained at Rs.109 during the post war era,” De Silva said.

According to the UNP Legislator, Sri Lanka made the mistake of relaxing monetary policy when the rupee was 109 to the dollar allowing imports to go up. “Recently the Governor of Central Bank referred to the size of the HitAd. He states that the Hit Ad is getting bigger and bigger because of the purchasing power. But I must tell him that none of those products advertised in the HitAd are manufactured in Sri Lanka,” De Silva charged. According to Ceylon Chamber of SMEs Alloy Jayawardane, SMEs are not in a position to produce having borrowed money from the banks at 18% interest rate, De Silva said. “We lost GSP+ that could have provided at least 10% – 15% benefit. Our trade deficit was at US$ 4.8billion in 2010 and has widened to US$9.5 billion in 2012. People elected you to manage the econom. In 2012 the apparel exports have come down by 5%, leather exports reduced by 15%, rubber by 3%, and all industrial exports reduced by 8%. Today this is more serious. Today the JAAF confirms that apparel exports have come down by 17.2% in April this year compared with corresponding period in 2012,” he warned. The UNP MP said that China was not the solution to the country’s economic woes. He said only 1 percent of Sri Lanka’s total exports are made to China. “We need to look for substitutes. We have been exporting 35% of the GNP. After 10 years this has come down to 17% due to your inability to manage the economy,” he said. According to De Silva, the Government had only earned US$1.3 billion during the four months period January – April in 2013. “We have received US$400 million from tea, US$260 million from rubber, and US$ 2,109million as foreign remittances from Sri Lankan migrant workers. But in addition to this the Government has borrowed US$1.5 billion using bills and bonds to bridge the trade deficit,” he said. The UNP legislator charged that the latest trend was to get commercial banks to borrow in foreign currency. He said the Bank of Ceylon had obtained a loan for US$500 million to service Sri Lankan Airlines debt while the National Savings Bank had been ordered to obtain a loan for US$1 billion to meet Government demand. “You can’t develop this country on debt. DFCC and NDB banks are also looking at borrowing US$250mn each. We are getting tangled in debt crisis. Moody’s has recently downgraded our ratings sighting the loss of foreign reserves in 2011, without enough improvement to support a positive credit action at this time,” he said.