Business

President responds to EDB’s stimulus request

Requests export sectors specified

• EDB to revert this week

President Gotabaya Rajapaksa has instructed the Export Development Board (EDB) to submit a detailed proposal with the ideal stimulus plan for Sri Lanka’s economy, in particular with regard to its exports.

These instructions were given in response to a formal letter sent by EDB Chairman Prabhash Subasinghe to the President on 3 March, which was exclusively reported by The Sunday Morning Business, requesting a stimulus package and other assistance for the export sector.

These requests were made following the spread of the novel coronavirus (Covid-19) epidemic globally in February. The pandemic was affecting Sri Lanka’s biggest export markets leading to reduced demand while also causing delays in shipments of imports from China, the country’s largest source of raw material imports.

Speaking to The Sunday Morning Business on Friday (19), Subasinghe stated that the Government responded to his letter, requesting the EDB to recognise specific export sectors that require assistance through the stimulus package.

“We are formulating specific strategies on how we can help the sector in more granular-level detail. We have to get back to the Government with detailed strategies.”

Subasinghe confirmed to The Sunday Morning Business that the EDB would submit the proposals before the end of this week if the Government offices remain open, but that the details were still being finalised.

The original letter was sent on 3 March when there were no active Covid-19 cases in Sri Lanka. However, since then, the island has been battered by the pandemic, with around 70 confirmed cases bringing the economy and social life to a standstill.

When asked whether the proposals would need to be amended if the situation in the country escalated, he said it would escalate and the proposals had taken that into account.

“The situation is going to escalate, the question is when. We are looking at a worse situation than now and working on the proposals.”

He said Sri Lanka’s exporters are only catering to the markets that are open at the moment as they wait for the markets which are closed to reopen.

“That is how the exporters need to balance the order books. This is an event that on this scale has never happened in the world. It is going to impact everybody. There is no question about it,” he added.

Imports from China account for 21% of Sri Lanka’s overall imports, much of which is used as raw materials for its exports. China is Sri Lanka’s largest source of raw materials such as fabric, cotton machinery, iron, steel, and plastics.

However, Covid-19 has now escalated to over 167 countries, making Europe the new epicentre of the outbreak, thus disrupting Sri Lanka’s tourism and export markets as well.

Epidemic-hit countries were announcing stimulus packages in the recent weeks to rescue their respective businesses and households. On 27 February, the Malaysian Government announced the “Economic Stimulus Package 2020” to protect the economy from Covid-19.

Meanwhile, on Wednesday (18), the White House was asking Congress for a $ 1 trillion Covid-19 relief and economic stimulus plan that would include industry-specific bailouts and payments to individual taxpayers. This is more than the $ 900 billion the US Government initially committed to bailouts in the 2008 financial crisis.

On 18 March, Turkish President Recep Tayyip Erdoğan announced a $ 15.5 billion stimulus package that seeks to revive the country’s economy and ease financial burdens on businesses and individuals impacted by the Covid-19 pandemic.

On the same day, the Government of Bahrain announced an $ 11.38 billion economic stimulus package to support its citizens and the private sector amid the ongoing pandemic.

Furthermore, on 12 March, the Australian Government announced a $ 17.6 billion economic plan to keep Australians in jobs, keep businesses in business, and support households and the Australian economy as the world deals with the significant challenges posed by the spread of Covid-19.

Warning that Covid-19 could crash around the world in successive waves over the coming months, on Wednesday (18), the Canadian Government uncorked $ 82 billion in direct aid and deferred tax payments for individuals and businesses.

On Tuesday (17), French Minister of Finance Bruno Le Maire announced a € 45 billion aid package for small businesses and other hard-hit sectors of the economy.

On 11 March, Thailand’s Cabinet approved a stimulus package worth an estimated $ 12.7 billion to help alleviate the impact of the epidemic on already faltering domestic activity.

On 25 February, the Indonesian Government unveiled a $ 725 million stimulus package to support the tourism, airline, and property industries in the wake of the global Covid-19 outbreak.