“We are of the view that the current situation will result in many adverse economic and social consequences to the country if it remains unresolved. We would like to highlight that foreign investors and potential businesses are increasingly losing confidence in the reliability of the business environment of Sri Lanka and are reluctant to enter the Sri Lankan market due to the current instability,” they said in a statement.
The Chambers noted that most of their members who are established in Sri Lanka and have been surveyed are already experiencing negative impacts on their businesses. “We request the relevant political authorities to ensure a stable and reliable business environment through the legal and democratically established institutions as soon as possible.”
The Chambers also pointed out that administration in Government departments and institutions had been affected by the constitutional issues, and respect for the law was needed to attract investment.
“It has been observed that decision-making procedures and Government processes have been adversely impacted and in some cases, financial damage has been caused to businesses. We appeal to all parties, political or otherwise, to respect the rule of law to avoid FDI outflow and to enable us to continue promotion of FDI to Sri Lanka. We remain dedicated to the cause of promoting Sri Lanka to European and American investors and to promote fair business and sustainable bilateral trade,” the Chamber said.
Due to the constitutional standoff created on 26 October by President Maithripala Sirisena, all three international rating agencies – namely Fitch, Moody’s and Standard and Poor’s – have downgraded Sri Lanka over concerns that Sri Lanka may find it more challenging to face debt repayments due next year. They have also voiced concerns over policy uncertainty and slowdown of fiscal consolidation, which is crucial for meeting Budget deficit targets.
According to Fitch, Sri Lanka has to repay an estimated $ 20 billion from 2019-2022. The International Monetary Fund (IMF) has also suspended their $ 1.5 billion Extended Fund Facility (EFF) program, which was expected to release a tranche in early November. The program was to have concluded in June and was viewed as an important litmus test for Sri Lanka to shore up confidence if it needed to borrow from international capital markets.
On Thursday, Central Bank Governor Dr. Indrajit Coomaraswamy sought to reassure the business community by insisting that macroeconomic fundamentals were sound and debt repayments were under control. However, he warned against fiscal slippage in the form of populist policies ahead of possible elections next year and emphasised on the need to continue structural economic reforms.