Colombo owes $100 mln in dues to shipping lines
Ever since banks in Sri Lanka tightened their purse strings, shipping lines are facing a backlog of US$100 million in payments from their agents in Colombo.
In this context, it is learnt that shipping lines are looking at the possibility of asking clients to make their payments outside Sri Lanka.
Shippers fear that Sri Lankan banks are unlikely to remit their money in future as they believe restrictions could be placed on foreign exchange sent out of the country.
As a result they will want exporters to either pay at the destination or at any other third party country, sources said.
Last year when shipping agents sent payments to banks they were not converted in full and for instance if $100,000 was sent to the bank only $50,000 would be remitted to their principals, one of the agents in Colombo said.
Some complained that “since June and July last year the banks were not allowing us to convert.” As a result payments got built up over time and now this has accumulated to $100 million.
This backlog of payments accounts for dues of all major shipping lines since July 2021. Agents have been remitting small amounts in payments from time to time.
This made shipping lines decide to charge the freight in dollars and not in rupees commencing January this year.
This new change brought about an ease of payments to exporters but now since Sri Lanka has defaulted on its loan re-payments and is seeing its ratings continue to slide, the shipping lines fear the worst is yet to come.
Similarities can be drawn from Lebanon, a country that already went through a financial and political crisis and found its own banks placing self-imposed restrictions on foreign currency withdrawals, when authorities refused to intervene. Banks in Sri Lanka are also learnt to not easily provide dollar conversions and are also more concerned about withdrawals from dollar accounts.
Shipping agents point out that what is frightening is that this will impact Sri Lanka’s import and export trade. At present 60 per cent of freight is pre-paid at destination to the shipping line locally and the balance at the eventual destination.
However, logistics partners pointed out that should such a situation arise, then manufacturing firms mainly the apparel sector firms will find it difficult since not all companies can afford to make payments in this manner.
| Colombo’s debts to airlines cross $150 mln | |
| Airlines operating to Sri Lanka need to be paid over US$150 million in dues as a result of the foreign exchange crisis in the country, resulting in most carriers limiting or withdrawing their flights from Colombo. Over the last 3-6 months payments for cargo and passenger travels have got accumulated, sources in the airline industry said. These are the repercussions of not been able to carry out remittances in foreign currency through Sri Lankan banks due to current shortage in foreign exchange. Moreover, agents in Colombo are forced to bear the losses from the depreciating rupee as payments made when the build-up started was at the rate of Rs.203 but now it’s at Rs.360 against the dollar. Sources point out that as a result of this issue while some airlines are stopping ticketing facility from Sri Lanka, others have taken the ticketing agents out. Due to the limited capacity airfares have also increased and ticketing by some carriers is being shifted to other countries. Agents are forced to stop selling tickets as some carriers have moved out of the Billing and Settlement Plan (BSP) platform and now it is feared that the worst is expected if all airlines pull out. This will have an immediate impact on travel agents operating in the country. Moreover, it is learnt that certain airlines have stopped accepting cargo originating in Sri Lanka as well. While you still can purchase a ticket to fly out of Colombo, foreign airlines are imposing restrictions on their operations. In this respect, carriers are looking at restricting the number of tickets they process but all are adopting different strategies to ensure they reduce transactions within Sri Lanka, like favouring credit card transactions and online payments. |
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