Sri Lanka exporters should bring back dollars: Finance Minister
COLOMBO (EconomyNext) – Sri Lanka’s exporters should bring back dollars and invest within the country at a higher yield instead of keeping them abroad and forcing the state to borrow from foreigners, Finance Minister Ravi Karunanayake said.
His comments came as the administration called bids from international banks to raise at least 500 million dollars for three years or more through as a term loan.
"I am requesting exporters again, instead of the money we are paying foreigners, why are exporters not bringing back their dollars?," Karunanayake told reporters Wednesday.
"I am kindly asking, when other countries are paying 0.5 percent at most in this country you can get 4.5 percent to 6.0 percent. Why are you doing this unnecessary sin (parperkarmaya) to us?
"We can bring any law to safeguard your money. Remember we are making this request with patience. If you do this in an obstinately way (hithoomathey) do not leave room for us to ask why is this money kept abroad?
"We are making this plea earnestly (ownakamin karana illeemak). Do not now say that we are threatening. That time is past. That time is over."
Sri Lankans started to stash money abroad after a money printing central bank was set up in 1951 destroying the hard currency peg with the Indian rupee and Sterling pound, as it tried to control interest rate and the exchange rate at the same time.
Sri Lanka also brought draconian exchange controls within two years of creating the central bank, helping make the country a lagging nation in Asia and impoverishing the people by destroying the real value of all rupee denominated savings.
In the 1980s partial deposit dollarization was allowed with eligible citizens allowed to hold foreign currency deposits.
In the last 10 years the government has also started borrowing in domestic markets through so-called Sri Lanka Development Bonds in another expansion of deposit dollarization.
Deposit dollarization makes it impossible for the elected ruling class to destroy people’s savings by currency devaluation.
Analysts have called for the central bank to be abolished so that the state will lose its key tool of making people poor, by printing money to keep rates down when governments give deceptive subsidies.
A safe environment for peoples’ savings and investments were sharply undermined by the last administration who expropriated through ad hominem law which is illegal in any free country.
This administration is planning to slap retrospective taxes and also enact taxes that can bankrupt companies with political connections to the last regime, further undermining rule of law and tax predictability.