‘Sri Lanka can face the GSP+ risk’
With proper focus and preparation Sri Lanka can face the GSP+ risk
and the Government has already taken necessary steps to manage this
risk, Central Bank Governor Ajith Nivard Cabraal said at a media
briefing on “ GSP+ Scheme and Sri Lanka from a risk management
perspective” at the Central Bank yesterday.
Central Bank Governor
Ajith Nivard Cabraal
He said that it is certainly good if the GSP+ is continued, but like
with the abolition of MFA, the country is prepared to move ahead even
without GSP+. On the other hand, non reciprocal concessions always carry
a significant risk of withdrawal and the GSP+ benefits should also be
viewed as another such risk the country has to face, he said.
In economic management and in industry the country has to undertake
risk management constantly and deal with risks so there is ample reason
to believe that the present risk could be dealt with and there is enough
evidence to indicate that it could be met successfully, Cabraal said.
Referring to the recent developments on the critical issues that Sri
Lanka has to consider he said that Sri Lankan exporters’ competitiveness
of exports to EU has increased sharply since November 2008 to January
2009 , due to the SL Rupee depreciation. Therefore the potential loss of
the preferential duty margin by around seven percent if the GSP+facility
is withdrawn will be well within the rupee depreciation range and hence
will not be a crippling blow to the country’s exports, he said. The
inflation also has declined sharply from 14.4 at the end of 2008 to
below one percent by end September 2009 and is expected to be around an
average of 3.5 percent for the year 2009. It is expected to remain low
in 2010 as well.
As a result, there has been a significant reduction of pressure on
input costs, he said.
The interest cost on borrowings also dropped drastically in all
market segments and the State banks’ new interest reduction measures
introduced on 28 October will lead to further reductions of interest.
Sri Lanka’s improved rating outlook will also facilitate external
borrowing at low costs. With the dramatic improvement of the reserve
position of the country, industries can also borrow from offshore
banking units at lower foreign currency interest rates, he said.
Improved investor confidence with the dawn of peace has reduced
uncertainty and exchange rates have stabilized.
Sri Lanka will continue to diversify and to improve quality, upgrade
technology and facilities and focus on fast track productivity
improvements which will help mitigating the impact of a possible
withdrawal of GSP+, he said. However, the Government of Sri Lanka has
appointed a committee consisting of several Cabinet Ministers to examine
the possibility of getting the facility extended, Cabraal said.