Sri Lanka exporters to get incentives as downturn worsens

Sri Dharanee Performance Arts Theatre

Feb 23, 2009 (LBO) – Sri Lanka has unveiled an export incentive program based on maintaining revenues and employment, while emerging data shows contracting nominal values with manufacturers planning to trim workforces. Sri Lanka’s government is giving a 5 percent incentive payment in domestic currency to any exporter who can show 5.0 percent more export proceeds remitted to the country over the same quarter last year.

The exports will be required to have prescribed minimum domestic value addition. The payments will be free of tax.

An exporter will have to submit proof of inward remittance from a bank and proof of employments by showing contributions to a state-run compulsory pension fund.

Overvalued

Sri Lanka’s exports, particularly to the United States, have been suffering even before the global meltdown due to excessive money printing since 2004 that drove the country’s inflation to much higher levels than the rest of the world.

Annual inflation above 20 percent in recent years had made the rupee progressively ‘overvalued’, but foreign borrowings and seesawing monetary policy has strengthened the currency.

By November 2008, the Sri Lanka rupee was 28 percent overvalued on a real