COYLE cautions rupee could come under pressure if import restriction eased too soon

• Recommends lifting of limitations only if further economic stability is achieved
• Urges govt. and all political parties to take sensible approach towards long-term recovery

The Chamber of Young Lankan Entrepreneurs (COYLE) believes that the rupee could come under pressure if restrictions imposed on certain imports are lifted too soon.

In the face of severe liquidity crunch, the government imposed imports restrictions on what it thought ‘not essential,’ which ranged from energy drinks to cosmetics to spectacles to motor vehicles.
However, most of restrictions have now been removed and restrictions are only imposed on a couple of hundred items including motor vehicles.

With the easing of foreign liquidity situation in the domestic market amid increased inflows, lower imports and Sri Lanka securing a bailout package from the International Monetary Fund (IMF), the government has indicated that imports restrictions that are still in place will be lifted gradually.

“…the Chamber of Young Lankan Entrepreneurs warns that currency depreciation could be expected if import restrictions are eased too soon. It is therefore recommended that these limitations are lifted only by yielding satisfactory values of our economic indicators, when further stabilisation of the economy is achieved,” COYLE said in a statement.  

After losing about 80 percent last year, the rupee had gained since this February amid improvement in the forex liquidity in the domestic foreign exchange market, which was a direct result of revocation of the mandatory forex sales requirement by licensed banks to the Central Bank from the converted export proceeds and workers’ remittances, and discontinuation of the daily guidance on exchange rates.

Meanwhile, an improvement in the forex liquidity in the domestic foreign exchange market was observed following the gradual relaxation and subsequent revocation of the mandatory forex sales requirement by licensed banks to the Central Bank from the converted export proceeds and workers’ remittances, and discontinuation of the daily guidance on exchange rates. 

As a result, the rupee during the year up to 31 March 2023, recorded an appreciation of 10.9 percent against the US dollar. 
Meanwhile, to come out of the ongoing economic crisis, COYLE urged all political parties in the country to work together.

“In order for the Sri Lanka’s economy to grow, both the current government and all political parties must work together to find lasting solutions rather than looking at partisan political opportunities,” it said.
“As the nation begins to emerge from the turmoil of its recent political strife, the Sri Lankan economy is starting to show the first signs of recovery. However, while COYLE recognises the improving financial health of Sri Lanka, they urge the government and all political parties to take a moderate and sensible approach that will ensure a long-term recovery,” it added.