Sri Lankan exporters look to cut exposure to Russia and Ukraine

Sri Lankan exporters are currently in the process of reducing their exposure temporarily suspending exports to the Russian and Ukrainian markets, a leading export chamber in the country said.

“Sri Lankan exporters are concentrating on reducing their exposure or tentatively stopping exporting to these markets,” said National Chamber of Exporters (NCE) CEO Shiham Marikar. 
The Russian invasion of Ukraine that started about a week ago continues to send ripples across the world since the two countries are key source markets for the global supply chain.
Despite Sri Lanka being a small economy, the poor diversification of its export markets and basket makes it vulnerable to the shocks that arise from the conflict.

Russia and Ukraine are key source markets for Sri Lanka’s tourism industry and also are main Ceylon Tea importers. 

As a result of the sanctions imposed on Russia by the West, local commercial banks have currently halted dealings with banks of both Russia and Ukraine and no exports related documents are being processed, NCE noted.

Exporters are growing increasingly worried about getting payments from the two conflict-stricken countries for shipments that have already reached their destinations.

“This is a major issue exporters are facing. They operate in credit periods and now with this conflict, it is a new challenge to get the payments of shipments already exported. This will impact the cash flows of Sri Lankan exporters. Given that we already have a forex crisis, we cannot afford this,” Marikar stressed. 

The tea industry is one of the worst impacted due to the sanctions on banks, he said.
 The closing of airspace to flights is another major hindrance to exports and the depreciation of the Ruble by almost 15 percent further adds to the woes.