Dlr crunch becomes the Grinch this Christmas
Containers at the Colombo Port in this picture by Indika Handuwala taken on December 23.
Sri Lanka is likely to face a further 10 per cent price surge in imported foods next month as the amount of containers clearing up daily at the Colombo Port has slowed down significantly since banks are unable to provide dollars. Containers cleared daily have reduced from 200 to about 20.
Essential Food Commodities Importers and Traders Association sources explained that the season’s cargoes are coming in and there is no shortage in items like sugar, dhal or rice but the buffer stocks of the past two months that should be in the warehouses are still at the port.
Importers are worried that suppliers are getting jittery when payments are not coming through and wonder whether if the dollar crunch continues they might not be able to purchase the same amount of food next year.
“We can’t keep on ordering food items and we might have to cut down on the food volumes by about 50 per cent from next year since even our suppliers will not send the cargo though they trust us,” one importer pointed out.
He noted that suppliers and their banks are now showing concern regarding Sri Lanka as the country has been downgraded and is considered risky.
However, the only silver lining is that India is unlikely to “allow us to starve” and in this respect the Sri Lankan authorities are said to have met their counterparts in the subcontinent to tackle the current crisis.
Despite concerns by Indian suppliers, they too have indicated to Sri Lankan importers that Indian government policy is that they should not allow a shortage of food for Sri Lanka and ensure a steady supply. But the crisis is likely to see a significant surge in prices, importers warned.
Trade Minister Bandula Gunawardena is having weekly meetings with different importer groups asking for dollars for the increasing imports calling over at the Colombo Port. And he in turn is running to the Central Bank and the Treasury and the latter two are now asking banks to prioritise essential foods when issuing dollars.
Sri Lanka purchases dhal from Australia and garlic from China that are likely to have further surges in prices as a result of the skyrocketing freight rates. However, imports from India due to the shorter distance freight rates are bearable, the importer said.
Another importer pointed out that there are currently about 950 containers at the port and this number is building up as imports continue to call over.
While commercial banks are said to be conforming to the Rs.203 conversion rate, only private commercial banks are open to providing dollars as state banks are said to be more concerned of holding the dollars to pay state bills.
Customs Director General Maj. Gen. (Retd.) G. Vijitha Ravipriya told the Business Times that they continue to clear the cargo for those making payments adding that banks have to release dollars for these importers.
He noted that importers are in communication with the banks and as soon as the Customs are forwarded the necessary documents even perishable items and others are released.
Sri Lanka Ports Authority Chairman Capt. Nihal Keppetipola pointed out that the current situation is a result of the dollar crisis and it could turn out to be a problem if the backlog that is currently building up impacts on the transshipment volumes as well.
In fact, now port authorities are segregating the containers into different areas, he said.
South Asia Gateway Terminal (SAGT) CEO Romesh David told the Business Times that they too do not face an issue but it could have an impact if there is a peak in transshipment.
On average import containers are not expected to stay for more than three days excluding weekends and public holidays but this time they are continuing to stay for months, it was noted.
Exporters are banking on government intervention to assist them. In fact, shippers point out that the country is reaching an extremely critical financial situation due to restrictions on tourism, less remittances from expatriate Sri Lankans as a result of which the government has been compelled to impose import restrictions.
But the problems are further compounded due to lack of containers for export and the surging freight rates, shippers state.
Value addition of exporters of Ceylon Tea is disturbed due to discouraging imports as a result of which “we continue to import but with difficulties,” Colombo Tea Traders Association (CTTA) Chairman Jayantha Karunaratne told the Business Times.
However, the dollar crunch is not a problem since exporters have sufficient dollars and there have not been problems for them in paying and clearing their cargoes, he noted.
Ceylon Tea with its fertiliser crisis is affecting exports, as importing countries are concerned about the quantity and quality of teas, he noted.
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