Dealers with links to black market dollar trade enter commodity imports

Several dealers with links to black market dollar trading registered with the Trade Ministry under the US$ 1 billion Indian credit line are now active in the import of essential commodities taking advantage of easing restrictions on open account transactions, a Pettah Traders Association’s high ranking member alleged.

Special Import License and Payment Regulations, No. 1 of 2011 have been amended with the “Open Account Payment Terms” only to be allowed to importers of 10 essential food commodities with effect from July 1 for a period of two months, the relevant gazette notification published this month revealed.

Central Bank Governor Dr. Nandalalal Weerasinghe has said that easing the open account transaction for certain essential commodity sectors due to some outside pressure will open the dollar trading in black market again.

Hawala/Undiyal business will resume their transactions with several importers through this open account channels, Dr Weerasinghe said adding that they imposed a ban and it has resulted in the decline of black-market rates coming down almost close to the official rate.

At present some of the local essential commodity suppliers have been given an opportunity to import essential food items under the Indian credit line and also enter the essential commodity imports . This has opened the doors for some new politically-influential commodity traders with connections to black market dollar dealers to enter into essential commodity including sugar importation business.

Consultant of the Essential Food Importers and Traders Association P.M Abeysekera said the formal banking channels of the much-needed foreign exchange was baseless. He warned that the country will soon face shortages of essential food items, due to the excessive restrictions imposed on open account trade and easing it for the importation of only 10 essential commodities will not solve the problem.

Top officials of the Central Bank and Treasury with 20-30 year experience know how to handle the dollar black market without confusing the essential commodity import business, he added.

Open account and DA terms are an arrangement between the buyer and seller, based on mutual understanding and trust, to import goods on credit terms, he said adding that local commodity importers are maintaining close ties with overseas exporters.

He noted that most foreign banks and suppliers are not recognizing the letter of credit (LC) facilities of Sri Lankan banks due to downgrading of Sri Lanka by international rating agencies and the suspension of international bond repayments.

The difficulty in opening LC’s in local banks and dollar shortage in the country has compelled the commodity importers to resort to open account transactions with overseas suppliers, he said.