By: Staff Writer
May 28, Colombo (LNW): Sri Lanka’s small and medium enterprise sector is warning that the country may once again be heading toward a balance-of-payments crisis unless urgent steps are taken to curb non-essential imports and stabilise the rapidly weakening rupee.
The Ceylon United Business Alliance (CUBA), representing a broad network of SMEs, has appealed to President and Finance Minister Anura Kumara Dissanayake to immediately impose a temporary ban on non-essential imports, arguing that global instability linked to the escalating Middle East conflict is placing immense pressure on Sri Lanka’s fragile foreign exchange reserves.
In a strongly worded appeal, the alliance warned that the country is already facing a critical shortage of US dollars, with rising import costs threatening to destabilise domestic industries that are still recovering from the economic collapse of 2022.
Business groups say the depreciation of the rupee has significantly increased the cost of imported consumer goods, raw materials, shipping, and energy, leaving many SMEs struggling to remain competitive. Industries dependent on imported finished goods are particularly vulnerable, as higher exchange rates translate directly into rising retail prices and shrinking consumer demand.
CUBA argues that restricting imports of products that can be manufactured locally would provide immediate relief to the economy while also strengthening domestic production capacity. The organisation identified sectors such as apparel, footwear, tiles, processed food, furniture, and plastic products as industries capable of meeting a substantial share of local demand if given policy protection.
According to the alliance, limiting apparel imports alone could help the country retain between $75 million and $150 million each month in valuable foreign exchange reserves. The group insists that such measures are not intended to isolate Sri Lanka from global trade, but rather to prioritise scarce dollar resources during a period of exceptional economic vulnerability.
SME representatives say local manufacturers are increasingly unable to compete with imported goods due to currency fluctuations and rising financing costs. Many small businesses that survived the previous crisis are now burdened by higher electricity tariffs, transport expenses, and borrowing rates, while consumers continue to reduce discretionary spending amid inflationary pressures.
Economists note that a weaker rupee can benefit exporters by making Sri Lankan goods more competitive overseas. However, for domestic SMEs reliant on imported machinery, packaging materials, chemicals, and industrial inputs, the depreciation has become a double-edged sword. Rising production costs are eroding profit margins and forcing some businesses to scale down operations or reduce employment.
CUBA stressed that any import restrictions should carefully exclude essential goods and industrial inputs required for production. The alliance specifically called for uninterrupted access to raw materials, fabric, fuel, medicine, machinery, steel, rice, and tourism-related supplies to avoid further disruption to economic activity.
The organisation warned that failure to act swiftly could result in factory closures, job losses, and renewed pressure on the country’s foreign reserves. It urged the Government to treat the situation as an immediate national priority, arguing that decisive intervention now could prevent Sri Lanka from slipping back into another full-scale economic crisis.