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Sri Lanka’s Garment Sector Reporting Only ‘Minor’ Delays

Sri Lanka’s apex apparel-industry group expressed cautious optimism about garment operations in the beleaguered South Asian nation, which is facing its worst economic crisis in decades.

In its latest advisory, the Joint Apparel Association Forum (JAAF) said that the process of political stabilization has begun with the appointment of new cabinet members in critical roles, including foreign affairs and power and energy. At the same time, Ranil Wickremesinghe, the returning prime minister, has convened a special committee to tackle shortages of essential goods such as fuel and medicine.

Wickremesinghe “faces some big challenges, but is well served by his experience in already having held the position,” JAAF said. Sri Lanka’s main opposition party, SLB, has also extended conditional support to the interim all-party government’s economic recovery efforts, even though it has rejected any ministerial portfolios.

Protestors, however, are continuing to take to the streets to demand the resignation of President Gotabaya Rajapaksa, whom they blame for the dismal state of affairs. Despite continued public pressure, ministers rejected a no-confidence vote by a 119-to-68 margin on Tuesday. The cabinet also remains short-staffed. “The appointment of the rest of the cabinet ministers is likely to take a back seat, as the government attends to the challenge of urgently acquiring the necessary foreign exchange reserves to pay for essential goods,” JAAF said.

Still, while minor delays were experienced with last week’s curfew, bulk deliveries of diesel to apparel manufacturers, which are among a prioritized list of services to receive fuel from specific stations, have recommenced, the organization said. Port operations, including at the port of Colombo, are also progressing smoothly with no loading or unloading delays. Workers are continuing to report for duty, with the police and army providing extra security in the Free Trade Zones to ensure they’re able to travel to and from their factories safely, JAAF noted.

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To address the economic emergency, the ministry of finance has unveiled a threefold “way forward” strategy that includes reducing the fiscal deficit to an optimal level, engaging bilateral and multilateral lenders to secure bridge financing and mobilizing other domestic resources to minimize central bank financing. Sri Lanka has also received $160 million from the World Bank, which it is considering tapping to pay for fuel shipments.

Meanwhile, Sri Lanka’s trade unions, which have repeatedly demanded that the president step down, say that urgent measures, coupled with international support, are necessary to provide “vital social protection, rescue the economy and enable the country to reach its real potential.”

“The crisis in Sri Lanka has its roots in bad governance, with many hugely expensive white-elephant projects adding to an already high debt burden, and leading to a collapse in foreign currency reserves,” Sharan Burrow, secretary-general of the International Trade Union Confederation (ITUC), said Thursday. “As a result, people are going hungry and the economy has been severely degraded.”

The unions have drafted a roadmap, emphasizing the need to increase the minimum wage, secure adequate supplies of essential consumer items such as medicines, create measures to ensure the generation of adequate foreign currency reserves and promote the transparency and public accountability of the interim government.

“The ITUC calls on the International Monetary Fund, which is discussing a package of support with Sri Lanka, to depart from failed policies of the past and include measures that support the real economy, that are compliant with [International Labour Organization] standards and that deliver social protection for all,” Burrow said. “The IMF needs to consult with the trade unions and engage with the ILO and other multilateral agencies to provide support that is sustainable and favorable to economic growth.”

Other countries are “at risk of a similar plight” to Sri Lanka due to Vladimir Putin’s war on Ukraine, which has created “huge gaps in the supply of grains, energy and fertilizers on top of existing inflationary pressures in the world economy,” she warned. “The international community, and in particular the international financial institutions, need to learn from the mistakes they have made in the past and deliver support that helps people through the real economy.”