Exports’ dilemma

Tuesday, 22 March 2011 00:53 - - {{hitsCtrl.values.hits}}

Despite rebound in 2010 over a negative performance in the previous year the dangerous trend of decline in exports as a percentage of GDP since 2000 was hurled at President Mahinda Rajapaksa yesterday as the Government remained wary of providing an exchange rate stimulus.

The inconvenient truth of this alarming trend was laid bare by UNP MP and Consultant Economist Dr. Harsha de Silva during the Parliament Consultative Committee meeting on finance attended by President Rajapaksa in his capacity as Minister of Finance.

Exports as a percentage of GDP in 2000 were 39% and in 2009 whilst it is forecast to have sunk further to around 17% last year.

In the face of this worsening situation De Silva had inquired from the President what the Government’s strategy was to boost exports in relation to the GDP? He had suggested that a competitive exchange rate will help exports. UNP MP Ravi Karunanayake also revealed that exporters were losing their competitiveness in global markets, prospects in some of which have diminished due to recession and other problems.

A visibly concerned President had asked Treasury Secretary Dr. P.B. Jayasundera and Central Bank Governor Nivard Cabraal who were present to comment. Treasury Chief had said that support to exporters via devaluation doesn’t deliver desired results but competitiveness has to be improved via better productivity and other factors.

Central Bank Chief had said that flexibility in the exchange rate largely on a market determined basis was prevalent. He however had said that the exchange rate will be maintained at around Rs. 110 to the US dollar.

Dr. de Silva viewed the latter as contradictory as a market determined rate cannot be fixed or maintained.

The deteriorating exports to GDP ratio persists despite export earnings in 2010 reaching its highest ever level of $ 8.3 billion, up by 17.3% over 2009, in which year it dipped to $ 7 billion from $ 8.1 billion in 2008. In December exports rose by 34% year-on-year, to $ 968 million, which incidentally was the highest monthly figure.

In view of mounting competition from other suppliers as well as rising input costs locally, exporters lobbies have been vocal in urging for swifter and effective measures to boost their competitiveness.

Green light in P’ment for Special Commodity Levy today?

Continuation of the imposition of the Special Commodity Levy is expected to be approved in Parliament today with likely consensus between the Government and the Opposition.

The importance of passing the necessary legislation today was emphasised by President Mahinda Rajapaksa in his capacity as Finance Minister at the Parliament Consultative Committee meeting on finance yesterday.

The President had suggested the approval of the move today and the members can debate it tomorrow.

The Special Commodity Levy on a wide range of imports including essential food items is a critical tax revenue source for the Government whilst it is also a measure to protect local farmers and industry.