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NCE yet to utilize foreign borrowing facility

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Dollar liquidity hurting operations
NCE President Ravi Jayawardena, Jayantha Karunaratne, Kaushal Rajapaksa, and Shiham Marikar launching the new Detailed Check Out System. Picture by Dinesh Perera.

The National Chamber of Exporters (NCE) noted that to their knowledge not a single one of their members had availed themselves of the new regulation allowing Sri Lankan companies to go overseas for borrowing purposes. They noted that the banking sector was currently reluctant in granting loans and that this was an impediment to the smooth functioning of a business.

The NCE expressed these views on 17 December at their annual event with media personnel held at the Galadari Hotel. Under extraordinary gazette 2213/35, published on February 3 2021 the Department of Foreign Exchange allows residents outside Sri Lanka to provide financing to entities within Sri Lanka.

Notably, the regulations allow foreigners to grant loans with tenure of 3 or more years to companies incorporated under the Companies Act, No. 7 of 2007 in Sri Lanka.

NCE members wishing to remain anonymous noted that the larger exporters with ratings currently above the sovereign should be called on to pave the way for such arrangements to be established in Sri Lanka. Members further alleged that larger exporters were currently crowding out smaller exporters from access to dollar liquidity through the banking system by either using their dollar deposits for their own operations or obtaining the limited credit available through the banking sector.

NCE President Ravi Jayawardena lamented that the dollar issue hurting the exporters currently was something that he had experienced in his youth.

Likening the system to the Foreign Exchange Entitlement Certificate instituted in the 1960s he noted that an unlevel playing field had developed in the Sri Lankan market. Jayawardena noted how he has a much younger man had to witness how gem merchants in the Ratnapura region had unfair access to foreign luxuries like cheese while the rest of the economy was constrained under centralized controls.

Jayawardena deeply criticized the unlevel playing field created by the dollar shortfall in the market and called on the government to not interfere in the operations of market forces that are better at allocating capital.

Jayawardena noted that he was currently incredibly wealthy in terms of LKR liquidity but this was of little value to his enterprise as he was unable to use these funds in his operations which require the importation of certain inputs.

He further called on the public to realize that though exporters were relatively wealthier than the local populous, they were still by international standards poor and also making narrow margins in a cutthroat international marketplace.

He noted that over 90% of export firms are indigenous enterprises and that it was a statistically insignificant proportion that even had the quantum of funds required to consider opening bank accounts in Dubai.

NCE members which are mostly unrated entities with much smaller operations are not capable of going to international lenders. Jayawardena noted that it would be difficult for international lenders to gain confidence in the quality of collateral that could be offered by Sri Lankan entities for the utilization of the leeway given under new regulations by the department of foreign exchange.

Monday, December 20, 2021 – 01:00

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