Exporter’s reply to Finance Minister Ravi Karunanayake

It was reported in the newspapers and media last week that the Government could afford not to issue bonds if the exporters and expats brought in their earnings to Sri Lanka. Sadly this is a myth probably induced into the Minister’s mind by some Treasury officials who do not understand business and economics. But it is also sad to note that the Minister comes out without numbers and make statements that are fundamentally false.

If one may ask a majority of genuine exporters of this country which accounts for revenue of $ 11 billion to the economy, 95% or more would bring in their revenue back to Sri Lanka. A small percentage may keep commissions or profits out for their own reasons.

The Government officials must understand that exporters need their export revenue to continue production, import raw material, pay salaries and maintain factories for the production circle. Hence it is a practically an impossible task for large sums of money to be kept away from the country from export of goods and services. 

In fact exporters continue to struggle when buyers ask for longer credit as then the manufacturer or the exporter is forced to borrow through FCBU banking facility to keep on production for next orders. Also the interest paid in Sri Lanka is higher than keeping money in developed economies as they pay 0-1% for US dollars whereas Sri Lanka pays 3-4%.

Yes, in the short run if the exporter sees major volatility in the forex market they may wait without cashing dollars to gain on the exchange benefits. But this does not account for exporters of not bringing in money to the country. It is a myth for those who are not in the export business. 

Secondly, out of two million expat workers, over 90% are sadly cheap labour exported. Once again it is surprising that if these poor workers don’t send their money to Sri Lanka as their families depend on their remittances for survival. On the other hand CBSL says that $ 7 billion comes into the economy through these expats. So what is this theory?

If the Government is expecting rich and capable Sri Lankans which is an extremely small percentage, to bring their savings to Sri Lanka, first they may have to study why it is not happening. The answer is, whilst the developed markets pay less interest they offer many lucrative investments in other economic areas, such as in real estate and securities.

The message to the Government is to speak the truth to the people, put the facts in the correct perspective and give confidence with a policy framework as now we have passed the 100 days. Sri Lanka still does not have political stability hence economic stability, which may be one good reason for the Minister to think about.