The Island
The Central Bank says the losing of GSP Plus would not have an adverse impact on Sri Lanka’s exports.
In a statement released last evening, the Central Bank said the GSP Plus trade concession to the regions of the European Union amounted to 1.4 percent of total export earnings from the region.
“According to the European Commission’s estimate, the total value of benefits in terms of lower import duties under the GSP+ scheme for the year 2008 was euro 78 million which is only 1.4 per cent of Sri Lanka’s total exports in the same year,” the Central Bank said.
“Therefore, the loss of preferential duty margin by around 6 to 7 percent arising from a potential withdrawal of the GSP plus facility is not expected to have an adverse impact on Sri Lanka’s exports,” it said.
Uncertainty about the extension of EU GSP Plus facilities saw investors panic at the day’s trading at the Colombo Stock Exchange yesterday.The All Share Price Index lost 99.74 points (3.24 percent) and the Milanka lost 150.98 points (4.34 percent) with turnover declining to Rs.763.7 million, down from Rs.885.2 million on Monday.
Part of the panic was also attributed to the arrest of Raj Rajaratnam over the weekend in the US over insider dealing allegations where he and his company (Galleon Group) is said to have made over US$ 25 million in illegal gains.
The European Commission issued the following statement earlier this week:
“The Commission has completed a thorough investigation into the human rights situation in Sri Lanka and in particular whether Sri Lanka is living up to the commitments it made to respect international human rights standards when it became a beneficiary of the European Union’s GSP+ trade incentive scheme which provides for additional trade benefits.
“The report comes to the conclusion that there are significant shortcomings in this area and that Sri Lanka is in breach of its GSP+ commitments. We will now consult with Member States on whether to prepare a proposal with a view to temporarily suspending these additional trade benefits,” it said.
A verdict on whether or not Sri Lanka is to get the GSP Plus trade concessions extended is expected to be made in January next year.
Trade deficit contracts, reserves up
Meanwhile, Sri Lanka’s trade deficit contracted for the eight consecutive month US$ 115.6 million in August 2009 from US$ 500.9 million in August 2008.
The cumulative deficit for the first eight months of this year too contracted to US$ 1.6 billion compared to the deficit of US$ 4 billion during the corresponding period of last year.
The Central Bank said official reserves reached US$ 3.8 billion by the end of last August, enough to finance imports for 4.6 months, buoyed by a contracting trade deficit, inflows to government securities amounting to a little more than US$ 1billion and absorption of US$ 2.5 billion from the domestic foreign exchange market.
It said the reserves position had improved to US$ 4.5 billion by October 13.