Business

EDB submits two recommendations to President for export sector survival

• 6-month moratorium should cover all export sectors
• Provision of working capital with amounts to be decided

 

With the aim of helping export businesses survive the Covid-19 pandemic, the Export Development Board (EDB) has requested the President to extend the six-month debt moratorium to cover all export sectors and also to provide working capital facilities for businesses.

These two recommendations were formally submitted by EDB Chairman Prabhash Subasinghe to President Gotabaya Rajapaksa, following the President’s instructions to submit detailed proposals to revive the export sector.

The President gave these instructions in response to a formal letter sent by 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.

Speaking to The Sunday Morning Business last week, Subasinghe noted that the six-month moratorium, announced recently for five main sectors, should be extended to the whole export sector, irrespective of the size of the business.

“We have requested an extension of the moratorium in order to manage the cash flow. They need to extend it to all export sectors. If they cannot do it for all sectors, at least they should do it for the top 10 key export sectors,” Subasinghe noted.

On 17 March, the President initially ordered all banks to suspend the collection of loans and provide a debt moratorium for a period of six months for information and technology, apparel exports, tourism, foreign employment, and small and medium-sized enterprises (SME) sectors. In addition to this, the Government also requested banks to provide working capital loans to these five sectors at an interest rate of 4%.

The second suggestion was to provide working capital facilities for businesses to enable them to pay their respective staff salaries, according to Subasinghe.

“The working capital amount depends on what the companies are going to request the Government and the Government should decide on that. We have not suggested an exact amount to them,” he added.

Furthermore, he emphasised that these two proposals should be implemented with immediate effect to protect the export sector as at the end of the day, Sri Lanka needs foreign exchange earnings, especially in a situation such as that faced by the country at present.

On a separate note, Subasinghe added that even if the local situation improves, the export performance is more dependent on the global situation. However, he added that if the islandwide curfew is lifted, certain businesses that have a demand overseas despite the pandemic can operate and complete their exports.

The pandemic is 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.

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. Subasinghe said Sri Lanka’s exporters are only catering to 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.

However, Covid-19 has now escalated to over 195 countries, making Europe the new epicentre of the outbreak while the situation in the US escalates daily, thus disrupting two of Sri Lanka’s biggest export markets.