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| Sunday, 21 September 2003 |
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Importers - happy Exporters - concerned Rupee appreciates FROM THE SUNDAY OBSERVER BUSINESS DESK The Sri Lankan rupee has been appreciating against the US dollar by around two per cent during the past few days due to reasons such as increased foreign direct investments, inflow of funds to the Colombo Stock Exchange and the quantum of aid the Government was receiving. This demonstrates that the economy is recovering. The Sunday Observer Business spoke to a cross-section of business personalities and officials of the Central Bank on the appreciating rupee and its implications on the economy. President Ceylon National Chamber of Industries Ranjith Hettiarachchy said it will benefit the country. Though exporters are at a disadvantage, they have not grumbled because interest rates have come down over the last few months. "Some Asian currencies have appreciated more than the Sri Lankan rupee. Therefore, we will not have many benefits in the region, but overall we will benefit as it will reduce the imported inflation, since most essential items are imported," he said. A Central Bank official said the rupee is on a free floating exchange rate and has stabilised at around Rs 94 against the dollar. Nanda Kohona of Ranfer International Group said the dollar remaining around Rs 94 (earlier it was at Rs 97) has affected them badly as they have already costed and planned for a certain amount. "It is a total exchange loss. Tea exporters are very concerned and we are trying to draft a protest paper. "Bank interest rates are also very low, around 10-11 per cent, and small timers like us have been drastically affected. We hope for a gradual increase in the dollar. The tea trade has been badly affected with the rupee gaining around six per cent during the last few weeks," he said. M.S.M. Niyas, CEO, Serendib Freight Services said: "The costing on imports will be less and will greatly reduce the burden on the consumer since most essential items are imported. Export earnings will be lower because of this. The lowering of the dollar rate has brought an inflow into the country. It will be good for the trade". Sampath Siriwardene, Resident Manager Galadari Hotel said the dollar depreciation has lowered room rates. "On the other hand, we gain in the Food and Beverage section as we can purchase items at lower costs. However, it is too early to estimate the exact figures. Overall, I think there will not be any gain or loss, it will balance out". Director Stassen Foods Raja Mendis said the move will definitely benefit consumers. When the dollar rate goes down, the cost of imported products will automatically decline and sales volume will increase specially in fast moving consumer items. This has a direct bearing on the cost of living decreasing considerably and many importers will slightly benefit due to increased sales volumes. The local production and manufacturing sector will see a big boom in the long run, he said. A news release from the Exporters Association of Sri Lanka, affiliated to the Ceylon Chamber of Commerce, said the strengthening of the rupee against the dollar would erode the competitiveness of exporters in addition to local manufacturers incurring high input costs such as high utility costs, rigid labour regimes and poor infrastructure. "Exporters are very concerned that the Central Bank has suddenly decided not to intervene in the market, without any warning whatsoever. These changes will cause losses on current orders, which have been based on existing exchange rates and trends," it said. Graetian Gunawardhana, Chairman of the Association said this decision can have serious repercussions on the Government's plans to rejuvenate the economy through exports. "The export sector earnestly requests the Government and the Central Bank to reconsider this move and possibly maintain the rate, around the level seen earlier this year," he said. |
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