Importers to get prior approval for non-essential items
Governor Central Bank (CB) Dr. Nandalal Weerasinghe in a speech at the Ceylon Chamber of Commerce (CCC) on Thursday has said that the open account being used for imports will be restricted from Monday meaning that importers will now have to get prior approval from the CB to bring down goods in the future. However crucial sectors such as apparel will be exempted from this direction with a special focus on non-essential imports, a CB official told the Business Times on Thursday.
This was done to stop certain exporters from ‘helping out’ importers like they are now by bringing goods on behalf of the latter on their bills and subsequently settling their dues off the radar. This was such a good business so much so that some exporters resorted to this practice on behalf of a number of importers.
The CB with this direction aims to reduce the import bill to US$1.5 billion per month, Dr. Weerasinghe said.
Imports halt
Certain local banks said that they have halted letters of credit and many of their customers are going through foreign banks and the dollar crisis is coming to a head. All bankers said they process only one-third of what they used to in trade finance. A banker said that banks are also grappling with corresponding banks being cautious when opening letters of credit for Sri Lankan traders. Certain foreign banks have put a ban on discounting letters of credit to Sri Lanka and certain others go to the nitty gritty of the client and the bank when giving credit.
Bankers lament that the negative publicity the country has got surrounding the forex crunch has got the world rethinking these trade instruments to Sri Lanka. Already banks in Sri Lanka’s biggest trade partner India are hesitant to honour letters of credit, a second banker said. He added the credit downgrading by all three global rating agencies has exacerbated the already difficult situation.
Dr. Weerasinghe in his speech at the CCC said that government securities and Sri Lanka development bonds will not be restructured. He said the increase in interest rates is temporary and the CB expects the interest rates to ease after three months.
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