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Paradigm shift on government policy to extend moratorium of SME sector imperative: Eran

As the micro, Small, and medium scale Enterprises (mSmE) sector has been among the most affected sectors in the economy during the recent and ongoing economic crises, the government should take a policy decision to facilitate the continuation of the moratorium given to them in the past said Eran Wickramaratne MP speaking on the debate on the SME in Parliament Wednesday.

Speaking on the special debate held in Parliament today at the request of the opposition, the MP stated that SME sector endured numerous challenges during this period of crises. The small and medium sector, which contributes about 50% to the gross domestic product, also contributes two-thirds of the employment sector.

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Therefore, he emphasized that the government has the responsibility to remove the challenges faced by SMEs and to get their full contribution to the manufacturing economy.

“This cannot be done by the banks alone, the government should take a policy decision with the involvement of the Central Bank to ensure the implementation of moratorium extended in the past.” The MP said.

The MP further said that under the present context, SMEs lack capital and have limited access to finance. The required skills are also limited. Regulatory barriers including starting a business with registration persist. Compliance with taxation and standards is not only difficult for small businessmen, but it is also a burden they cannot bear. Market access is also limited. Especially since there is a lack of knowledge about the quality of products and foreign market opportunities, export opportunities have also been lost to small and medium-scale businessmen. The government should generally focus on providing these needs with the required technology. It is important for the government to adopt a firm policy for the betterment of SMEs which contributes to GDP immensely.

Due to the increase in utility costs such as water and electricity charges, petroleum prices, and transportation charges, many SMEs have withdrawn from the production process, not because of their fault, but because the government has failed to offer solutions and relief to them.

The member who said that there is no need for the government to act always, according to the conditions of the International Monetary Fund, elaborated on an immediate decision taken for the good of the country when he was the Acting Minister of Finance.

Soon after the Easter bomb attack, there was a request from the concerned parties to provide relief in order to prevent the damage caused to the tourism sector.

According to their request, as acting finance minister immediately announced a moratorium for the tourist sector after having obtained the approval of the Cabinet of Ministers. Moments after that announcement, officials from IMF in Washington made a phone call and asked for an explanation for hours about violating the conditions with them, thus granting a moratorium as a relief to prevent damage to the tourism sector after the Easter attack.

Wickramaratne said he explained to them that when you have an accident while traveling in a vehicle, you cannot go to find the family doctor. There is no option but to get treatment from the nearest hospital ICU. As the country continues to receive foreign exchange by providing relief to those in the tourism sector who are facing difficulties, he said that he replied that we would be able to pay the loan taken from IMF as well. And a few hours later, he recalled, the IMF also issued an announcement that the Sri Lankan government's measures to provide relief to those in the tourism sector were a timely act.

On the need to ensure durable policy for the betterment of the economy, he said that when SMEs are facing various problems and unable to pay their debts, the bank auctions the assets and properties of the debtors. Small and medium businesses contribute to the country's productivity and provide employment opportunities. Wickramaratne said that it was reported to the COPE committee in Parliament recently the People's Bank decided to write off the crores of loans given to a small number of large-scale businessmen as bad debts.

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Some blame the banks for these problems faced by small businessmen and manufacturers. This is not the bank's fault. This is the fate of the country due to poor government policies and poor management that allowed the economy to contract. The percentage of non-performing loans in banks was 7.6% in 2021. It has increased to 11.3% by 2022. That impairment is Rs. 909 billion. Today, any sector of consumption, construction, wholesale and retail trade, manufacturing, or infrastructure has piled up with unpayable debts.

He urged the government should immediately implement a system to provide relief to small and medium businessmen and producers who are facing difficulties.

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About half a million job losses have been reported. If there is no solution to the problem, unemployment may increase to one million in the future. Wickramaratne, who requested to extend the moratorium concession given for non-payment of debts of Micro and SMEs, emphasized that as the banks alone cannot take this decision, the government should take a policy decision at the national level and make proper intervention to save the country’s economy from further deterioration.

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