CBSL to impose strict guidelines

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Balance of payments crisis hit Sri Lankan authorities  were now  considering to   impose strict terms and conditions to relax its open accounts restrictions for Island nation’s essential imports, the Ministry of Finance and Central bank of Sri Lanka (CBSL) officials told Finance Today.

Several importers representing Pettah Wholesale Market trade association together with trade Minister Nalin Fernando had recently sought CBSL approval to remove the existing open account ban that had been imposed on the importation of essential food items including rice, wheat flour, sugar, potatoes, red dhal, onions, dry chillies, dry fish, beans and milk powder.

However, CBSL authorities now said that they may considering to relax this open account restrictions for  essential food items if the importers  agree to provide, all information related to imports, including their import financing procedures and dollar buying rates.

Open account imports allow food to be cleared on suppliers’ credit which can be settled later through official or unofficial means.

“If these open account transactions are carried out without proper control, it may have some effect on the exchange rate which is now somewhat controlled,” officials said.

“Further restrictions should be placed on these open accounts as a measure to prevent this situation and reduce the gap between the black market and the official exchange rate”.

The CBSL banned open accounts in May in an attempt to reduce the unofficial foreign exchange market channels such as Undiyal/Hawala.

But said, decision hit essential imports, which are usually imported long-term relationships on suppliers credit.

It is estimated that the island needs about US$ 150 to 250 M a month for food imports according to industry officials.

Earlier, the CBSL announced that they were ready to supply the required foreign exchange through official banking channels so that there would be no shortage of essential food items.

But now the formal banking system is facing a serious foreign currency as well as local currency shortages.

But the CBSL says some are creating unnecessary fears about food shortages.

By Ishara Gamage