Businesses with dollar income sources will only survive this crisis: Central Bank Governor

28 December 2022 03:05 am - 21 - {{hitsCtrl.values.hits}}

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“Only those who can survive as I always say are the foreign exchange earning sectors”- Dr. Weerasinghe

Urges rest of businesses to use ongoing crisis as springboard to venture into forex earning sectors

Says dollar earning companies could navigate the import shortages and beat domestic inflationary forces much

better Offering a stark warning to the business community in the country, Central Bank Governor Dr. Nandalal Weerasinghe recently said only those who could survive this crisis are the ones who could make earnings in foreign currency at a time when the economy is undergoing a dramatic reset in its attempt to come out of its worst balance of payment crisis.

“Only those who can survive as I always say are the foreign exchange earning sectors,” he said referring to the potential pain that could be felt in the process of restructuring the country’s debt stock, which is now in default.

Speaking at a recent forum in Colombo, Dr.Weerasinghe however urged every business to transform itself to earn dollar incomes using the current crisis as an opportunity as those who earn in dollars get a better deal compared to a year ago after the rupee collapsed shedding nearly 80 percent of its value.

He said such companies could navigate the import shortages and beat domestic inflationary forces much better than those who are confined to the home market alone, earning only in rupees. “In this kind of situation, and specially in a balance of payment crisis situation, people who are engaged in foreign exchange earning sectors can only survive and do business.

This is an incentive for all the industries to focus on turning to businesses which are more competitive, foreign income operating entities. This is where the future is,” he stressed.

When the Sri Lankan economy began to feel the brunt of the foreign exchange shortage from the mid part of last year, when the then authorities bungled the economy amid dim prospects for foreign inflows during the pandemic, many enterprises with the exception of those who have at least an element of foreign income started feeling the squeeze in their operations and thereby their financial performance.

This was because they were compelled to either significantly phase down their operations or close certain business lines altogether when they could not import either the intermediate goods needed to keep their production lines running or the finished goods imports which generated them steady incomes as they found it extremely difficult to find foreign currency to open letters of credit when the dollar shortage grew out of control. Making the conditions worse in 2022, these companies were confronted with multifold increase in costs due to both runaway inflation and the sharp loss of value of the rupee against the dollar, sending their manufacturing and operational costs throught the roof and thereby shrinking their margins.

This was seen from the Producer Price Index, which remained stubbornly above 100 percent during the last couple of months. However, most of such costs were passed down to the end consumer as seen from the 70 percent increase in consumer prices.

Tightening of the monetary policy aimed at squeezing demand conditions also reduced much of their incomes forcing businesses to downsize their operations. However, the dollar income earning companies showed much resilience during this period as they found little disruption in sourcing the imported materials they needed while the rupee depreciation added a sudden boost to their toplines in rupee terms, adding further strength to their financial performance.

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Comments - 21

Anura Nanayakkara Wednesday, 28 December 2022 06:45 AM

Mr.Weerasinghe should also realise the sentiments of Sri Lankans, who had been asked to do things in a different path by the governments existed earlier. Now you tell them a different path.It is correct but will take time, like everything else.

Ranil Wednesday, 28 December 2022 07:13 AM

Even with businesses with dollar income are leaving, these policies only work in books not in real life. Sri Lanka will be utterly bust by mid 2023. How can you pay back the interest for local borrowings? 1. print money 2. borrow for where? 3. restructure the FDs

Jude Wednesday, 28 December 2022 09:07 AM

Again, Nandalal in front of a podium stating the obvious!! And talking some nonsense too. SL to progress as an export oriented country, there's a long long way to go!! Just to give you an idea, SL ranked in the bottom five of asian countries out of 15 in garments productivity!!

Jude Wednesday, 28 December 2022 09:43 AM

I reiterate, SL ONLY way to DEVELOP thru agriculture and agri-based industries!! SL should follow the template of Vietnam's rapid growth and meteoric to become one of the Asia's powerhouse !! Viets were in 20 year war with Yankees!! Then develop into top 5 Rice producers in the world and top 5 Apparel exporters in the world!! Now people, take note!! Yeah!!

Mahila Wednesday, 28 December 2022 01:34 PM

The difference is Viets didn't ha ROBBERS

Cannot compare Vietnam attitudes to ours Wednesday, 28 December 2022 08:20 PM

Culture of Vietnam incomparable to Sri Lanka. They are not tolerant of crooks.

Alam Wednesday, 28 December 2022 10:50 AM

Stating the obvious without a solution, we need innovative thinkers, world business leaders from SL, not pen pushers with old theory.

Cisco Wednesday, 28 December 2022 01:31 PM

Mr Governor, you don't have to say this. Solution for this crisis is to increase export by developing export oriented industry. Instead you are taxing the industry based on export and specially IT industry which lead to brain drain.

M Fernando Wednesday, 28 December 2022 02:52 PM

Sri Lanka's IT sector is miniscule when compared to the powerhouse next-door. No one even thinks of Sri Lanka when talking IT. Yes, we have smart people and a few good companies. Sadly they are dwarfed by India's sector. SL companies could (carefully) enter into strategic partnerships with Indian companies and take advantage of their well-established access to IT markets across the globe. Foreign currency is foreign currency whether USD or INR and at present, SL has none of either.

Do not joke to keep our poor paid IT people here Thursday, 29 December 2022 12:04 PM

Sri Lankans might get 2nd tier work from Indian companies if they ever run out of work. But they have so much intellectual capital in IT, we are no use to them. For Lankan IT professional going overseas for to live is best. It is utterly damning in your attitude to expect IT people here to work for the peanuts being paid too.

Silva Wednesday, 28 December 2022 01:39 PM

Dear Doctor, Your point is correct.But the situation now in SL for agricultural export products is becoming bad. The CoP is eating the profitability. Either you allow dollar to float freely or introduce some incentive schemes to reduce CoP.

Perera Wednesday, 28 December 2022 01:52 PM

Shipping is a huge forex spinner. Should have a clean minister !

Joseph Wednesday, 28 December 2022 02:14 PM

The current Governor has worked for the Bank for more than 30years and should be held responsible for the sorry state of the country today

Joseph Wednesday, 28 December 2022 02:14 PM

The current Governor has worked for the Bank for more than 30years and should be held responsible for the sorry state of the country today

Jayantha Wednesday, 28 December 2022 02:17 PM

Just another unpractical statement like his bankrupt statement. This fellow is not a practical guy. Pls get rid of this guy and appoint someone with practical kknowledge.

Premalal Perera Wednesday, 28 December 2022 02:30 PM

By the time we pay for electricity we will not be too competitive in any market.

TJ Wednesday, 28 December 2022 02:33 PM

Are such businesses exempt from income tax?

Daily Mirror Humbug useless to give name Wednesday, 28 December 2022 02:47 PM

Hi Cisco Brain drain in IT industry is definitely not due to new Taxes on them. Are you aware that IT industry professional has to pay Personal Income tax in Australia Canada and in Western countries. That is also average of 30-35%. My God when country is trying to come out of debt local and foreign we get dramatists in media mass and social.

Dilshan Perera Wednesday, 28 December 2022 02:54 PM

In that case.. ALLOW PAYPAL!

Kandy Wednesday, 28 December 2022 02:55 PM

Hon. Governor, stick to your promise

clock Saturday, 07 January 2023 12:16 AM

We are seeing for the first time that the US Dollar is not the only forex currency either now or in the future. The regional currencies are coming to the fore. Perhaps time to adopt to Indian Rupee.

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Businesses with dollar income sources will only survive this crisis: Central Bank Governor

Comments - 21

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