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Stronger Rupee Poses Challenges for Sri Lankan Exporters, Associations Urge Policy Reforms

Five leading export associations have raised concerns over the challenges posed by the appreciation of the Sri Lankan rupee against the US dollar, urging authorities to address pressing issues affecting export businesses.

They emphasized that a stronger rupee leads to higher prices for international buyers, directly impacting the competitiveness of Sri Lankan goods in the global market. The recent appreciation of the rupee, falling below Rs. 300 per US dollar since March 19, has further exacerbated the situation, endangering the sustainability of businesses and the livelihoods of employees.

Despite the rupee’s appreciation, the cost of living remains high, exerting pressure on worker wages. Moreover, the timing of the rupee’s appreciation coincides with weak global demand for merchandise exports and stiff competition from rival countries.

The associations highlighted additional hurdles, such as restrictions on foreign currency movement between commercial banks and the compulsory conversion of export earnings into the local currency. They criticized the mandatory conversion policy enforced by the Central Bank, which compels exporters to convert foreign exchange receipts into rupees at overvalued exchange rates, placing further strain on export operations.

Given the positive transformation of Sri Lanka’s foreign exchange reserves, the continued enforcement of the mandatory conversion policy is deemed counterproductive and disadvantageous to exporters. The associations stressed the importance of prioritizing export-led recovery to bolster vital export earnings and attract future investments.

To address these challenges, the associations called for the repeal of the mandatory conversion policy and urged the Central Bank to revisit related regulations in line with the evolving economic landscape. They emphasized the necessity of fostering an environment conducive to the growth and competitiveness of Sri Lanka’s exports, thereby promoting sustainable economic development and securing employment opportunities for citizens.

In conclusion, the associations asserted that addressing these policy concerns is essential for laying the foundation for long-term economic prosperity in Sri Lanka.

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