Monday 13th September, 2021
Nobody has taken kindly to the stringent import restrictions the Central Bank (CB) has imposed, however necessary they may be to shore up the country’s depleting foreign exchange reserves. From the reactions of various people to the government move to restrict imports, one can guess how they prioritise their needs and wants. Most of them are worried about possible shortages of domestic appliances, food items, beverages, skincare products and the like. Their concerns and consternation are understandable. But, curiously, what worries the Opposition is the restriction on underwear imports, of all things!
It is said that the ordinary Sri Lankans think with their stomachs, especially when they vote. In commenting on the 100% cash margin deposit slapped by the CB, the focus of many Opposition worthies has been on a possible shortage of imported underwear; this kind of reaction shows the Opposition MPs’ preoccupation with their nether regions more than anything else—a fact that has become evident from their lewd utterances in Parliament. They have been flogging the underwear issue to the point of queasiness during the past couple of days. The Opposition is bent on getting its back on the government politically, and this may be the reason why it has sought to give the latter a wedgie, but in so doing it has unfortunately reduced an otherwise very serious economic issue to a mere political joke.
Garments, imported or otherwise, are the least of Sri Lankans’ problems, at present, for two reasons. In April, they bought all the clothes in the world as if they had never seen them before, and they have loads and loads of them in their wardrobes; their irresponsible shopping sprees caused an explosive spread of Covid-19, which has led to a situation where they are confined to their homes and cannot wear what they have bought. On the other hand, enough garments are produced locally, and export quality clothes also enter the local market. So, the Opposition politicians’ worry about a possible shortage of underwear is baseless.
Ironically, the present-day political leaders looked down upon garment factories during their Opposition days about three decades ago. When the late President Ranasinghe Premadasa set up garment factories throughout the country to develop the rural economy and provide employment to the poor, the then SLFP-led Opposition ridiculed his project, claiming that he was having Sri Lankan girls stitch jangis for suddhis (underwear for the white women). The JVP, too, looked down upon the garment factory programme and coined a catchy slogan to denigrate it—kellanta gament, kollanta pament (garment factories for girls and pavement hawking for boys). Today, the Opposition led by the late President Premadasa’s son, Sajith, would have the public believe that Sri Lankans will have to do without underwear due to import restrictions! The worst critics of his father’s project at issue have become dependent on garment factories to earn foreign exchange.
It is expected that the 100% cash margin deposit requirement will help maintain the stability of exchange rates and foreign currency market liquidity as it discourages excessive imports of speculative nature. Most of the commodities on the CB list are non-essentials, and the public can do without some of them, or locally produced alternatives thereto are available. But how can tyres be considered non-essentials; are locally manufactured tyres available to prevent shortages due to import restrictions?
True, the blame for the country’s forex woes should be apportioned to successive governments which borrowed heavily from external sources for projects that have become white elephants. A sizeable chunk of the borrowed funds also ended up in the off-shore accounts of the politicians who have been in power during the past several decades. The former Rajapaksa administration was mainly responsible for borrowing excessively and embarking on useless ventures in the name of development. But there is no gainsaying that the country has to adopt drastic measures to hoist itself from the present economic mire. Import restrictions alone will not do. While importers are discouraged from bringing in non-essential goods, action must be taken to ensure that the country benefits from Sri Lankan exporters’ dollars, and exporters do not misprice their goods to park their dollars overseas to make the most of the rupee depreciation. The practice of stashing away dollars overseas and mispricing have aggravated the country’s current account deficit by depressing the dollar inflows. It is doubtful whether any effective measures have been adopted to prevent exporters from under-invoicing goods to keep their dollars abroad and importers from over-invoicing goods to send their dollars out.
Meanwhile, not all mobile phones can be considered non-essential goods. Most Sri Lankans are dependent on mobile phones to carry out their day-to-day functions. The pandemic has made the mobile phone essential for even children following online lessons. There are also others who purchase the latest editions of mobile phones unnecessarily. Import restrictions, therefore, could have been imposed on mobile phones, if at all, above a certain factory price. The same holds true for domestic appliances such as refrigerators which people cannot do without.
The 100% cash margin deposit requirement will enable big-time businessmen with enough dollars to monopolise the import market by elbowing out others, and fleece consumers. Such a situation has to be averted. Most of all, the need for revising the list of imports affected by the extreme cash margin deposit measure cannot be overemphasised to prevent it from dealing a crippling punch to the average consumer.