NEC to work together with Finance Ministry and Central Bank to tackle foreign exchange crisis

• NEC holds first discussion with private sector leaders 
• NEC Secretary-General says export conversions need to be monitored to ensure steady foreign exchange inflow to country 
• Says 2019 Budget crucial in implementing intermediate and long-term measures to avoid second crisis
• Private sector urges Govt. to establish policy consistency, laments heavy tax burden 

Chathuri Dissanayake

The National Economic Council (NEC) is in consultation with the Finance Ministry and the Central bank on implementing short-term measures to improve foreign exchange inflow in dealing with the current foreign exchange crisis. 

Commending the work done by the Central Bank in managing the situation, NEC Secretary-General Prof. Lalith Samarakoon yesterday said that the Government is now looking at improving inflow of foreign exchange to the country by closely monitoring exchange conversions.

“We should also try and stop foreign exchange outflow at least as a temporary measure. The Finance Ministry has already taken some measures on the matter. Exports should increase. One part of the problem is that whether exporters bring the foreign exchange earned from exports back into the country. The Finance Ministry is in daily talks with the Customs to see how Sri Lanka foreign exchange conversions can be brought back to the country without delay,” he said. 

Noting that most intermediate and long-term measures should be included in the Budget 2019, Prof. Samarakoon said that the NEC is now in discussion with the Finance Ministry to develop new proposals to tackle the issue. 

“We are looking at Budget proposals and how the money is being allocated to determine the developments needed to tackle the issue,” he said, noting that Budget 2019 is a crucial juncture for the country to avoid a second crisis that may come with the country’s debt burden. 

Further, he said that during the consultation the NEC had with private sector business leaders in the country to strategise against the current foreign exchange crisis, they had raised concerns over current import limitations imposed by the Government. 

Although immediate measures taken by the Finance Ministry to tackle the rupee depreciation issue includes limiting exports and encouraging local industries, some business leaders present spoke against the move, saying that the restrictions will affect companies which import consumer goods, Prof. Samarakoon said.

The meeting, chaired by President Maithripala Sirisena with the participation of several key Ministers and officials of the Government, sought views and recommendations of the private sector business leaders to manage the current exchange rate crisis. A number of leading business entities, including, Vallibel Finance, Hayleys, Aitken Spence, NTB, NDB, Commercial Bank, Sampath Bank, NSB, Pan Asia Bank and University Dons attended the meeting held on Tuesday.  

“One of the key factors that came out at the meeting is the issues faced by the business community due to lack of consistency in economic policies, especially in the tax policies introduced by the Government. Further, they also said the current tax policy has had worse adverse impact than the current rupee depreciation,” he said. 

Prof. Samarakoon pointed out that although the Government has tried increasing revenue through taxation, the Budget deficit can be solved through increasing income. 

“The new tax policy was to increase the income, but similarly, we need expenditure streamlining consolidation. I think the most important thing that should happen next in formulating the Budget is that we focus on managing the expenditure efficiently and reducing expenses instead of just increasing taxes to increase Government revenue,” he explained. 

According to him, the business leaders have also pointed out that Sri Lanka has not been able to reap the full benefits of Free Trade Agreements (FTAs) despite the existence of many. 

“Private sector representatives pointed out that although it was good to have trade liberalisation, this can have an adverse effect on the local industries,” Prof. Samarakoon said. 

The representatives also urged the Government to develop a proper system to attract long-term direct investments to improve business confidence as currently Sri Lanka is only attracting short-term portfolio investments.

“The private sector pointed out that there is little confidence in the economy as the risk of investment is high. They said that the Government should also work towards reducing the risks,” Prof. Samarakoon said. 

Prime Minister Ranil Wickremesinghe, Minister Mangala Samaraweera, State Minister of Finance Eran Wickramaratne and Minister Harsha de Silva represented the Government in the discussion along with Central Bank Governor Dr. Indrajit Coomaraswamy, University of Colombo Vice Chancellor Professor Lakshman Dissanayake, and Jayawardenapura University Vice Chancellor Sampath Amaratunge.