ECONOMYNEXT – Reviving exports urgently is vital to keep Sri Lanka afloat during a Coronavirus crisis and the sector needs room to adapt and cater to emerging demand, though firms are now operating below capacity amid COVID-19 curfews and disrupted supplies, an official said.

“It is important that the export industry understands that it is a national priority for us to export and bring in foreign revenue to Sri Lanka,” Prabash Subasinghe, Chairman of Sri Lanka’s Exporters Development Board, told EconomyNext.

“I would say it is a clarion call to all the exporters to export and bring in as much foreign currency as they can to rescue Sri Lanka from this COVID-19 crisis”.

Sri Lanka’s export firms are operating at 25 percent capacity but there are new opportunities that can be made use of, Subasinghe, a top exporter of rubber tyres said.

Exports Down

The EDB had lowered an original target for export of goods and services for 2020 from 18.5 billion US dollars to 10.75 billion.

Controls imposed to combat Wave-II COVID-19 infections from third countries outside China has put Sri Lanka on a partial lockdown for almost a month.

Due to curtailed labour movement, disrupted supply chains, and key export markets being closed, Sri Lanka’s industries have been badly hit.

Tourism and apparel as Sri Lanka’s largest exports are at a standstill.

Due to the closure of the airport to inbound passengers, there is zero tourism in the country while the apparel industry is expecting to lose 1.5 billion US dollars from March to June as the simultaneous supply-demand crisis cripples the industry.

“Exports even in a subdued form are the only saving grace for Sri Lanka,” Subasinghe said.

Sri Lanka’s agriculture sector is generally operating but farmers have difficulty selling products.

New Prospects

The Coronavirus Crisis has also presented new opportunities in sectors such as food and agriculture, processed food, rubber, seafood, and apparels, Subasinghe said.

“There’s a huge demand for food and agriculture and on top of that there’s a huge demand for all the equipment needed for medical services such as medical gloves, face masks, ventilators, and ventilator parts,” Subasinghe said.

“Those are the areas we need to exploit and create some revenue, even if we are not producing, we should be able to switch”.

Currently, almost all the export companies are operating in Sri Lanka but at a limited capacity maybe to 20 to 25 percent operational.

“At EDB, we are extremely active and supporting any exporter and all exporters for them to try and maintain a certain level of business continuity as a Number one measure,” said Subasinghe.

“Number Two, we are working on areas where there is a lot of potential such as food and agriculture, processed foods, gloves, medical equipment.”

“The apparel industry will face a greater crisis due to order cancellations and retail shops being closed, hence the options for them would be to switch to production of PPE such as medical gowns and medical face masks”.

Sri Lanka’s apparel industry is making million PPE suites and two million masks free of charge to be donated for the state pharmaceutical corporation.

But there are not enough raw materials to produce masks and PPE suites in neither large quantities nor N95 masks industry official said.

Sri Lanka’s price control agencies are also a threat to the economy, analysts say. National Medicines Regulatory Authority (NMRA) slapped price controls on masks that have been lifted since then.

The exports of some masks are banned.

The Government has also identified agriculture, rubber, seafood, and coconut as essential services, meaning they can operate freely by adhering to precautionary guidelines.

Globally, there’s a huge shortage of medical equipment where countries are shifting production to produce medical equipment.

Major Carmakers such as General Motors, Fiat, Ford, and Tesla have pledged their support to offer resources to make ventilators and medical equipment.

Rupee under Pressure

Sri Lanka’s rupee had fallen sharply over March with large liquidity injections being made to keep rates down. The rupee fell close to 200 and reversed directions Thursday amid intervention.

Sri Lanka’s Central Bank has also set up a re-financing facility through which up to 50 billion rupees will be re-financed for businesses hit by Coronavirus, which analysts have said is similar to facilities set up by the Reserve Bank of Zimbabwe 15 years ago which led to a collapse of the currency.

More liquidity has also been injected, which analysts say will pressure the currency by creating demand over and above any export proceeds.

Sri Lanka’s central bank had earlier published an appeal for dollars to be brought to the country with no questions asked as the rupee fell, imports have also been controlled, but liquidity has not been. (Colombo/Apr10/2020-sb)