Saturday, October 1, 2022

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Relaxation of open account ban on imports averts essential food crisis

The reversal of the decision of the Central Bank on the directions of Governor Dr NandalaL Weerasinghe to ban imports on open account transactions following the instructions of President Ranil Wickremasighe has everted a severe food shortage and the sky rocketing of prices, official sources said.

Central Bank Governor Dr. Weerasighe reluctantly agreed to the request of the government to relax his open accounts restrictions for Island nation’s essential imports with strict guidelines.

This non flexible attitude of the Central Bank has caused harm more than good in the practice of the monetary authority since the period of former Governor Prof W D Lakshman whose Modern Monetary Theory and other tools his yesmen in the CB played havoc in the economy.

This arrogant attitude is now taken forward by the new Governor with the aid of some of his friendly officials going even to the extent of criticizing the country’s head of state.

This attitude of the CBN governor and his handpicked officials should be stopped immediately as it was not their business and mandate.

He clearly displayed this attitude when responding to a question raised by a journalist at a recent monetary policy review media conference on the ban on open account transactions on essential commodity imports saying that they had to relax restrictions on the intervention of some government bigwigs.

Several importers representing Pettah Wholesale Market trade association together with trade Minister Nalin Fernando had sought CB 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.

After relaxing the Central Bank’s ban on open account transactions these food items became available in the local market , consumers claimed. .

Sri Lanka food prices have started to come down after open account imports were allowed, while more money has been allocated from an Indian credit line, Trade and Food Security Minister Nalin Fernando has said.

“We decided in the cabinet due to the breakdown of import activities due to forex shortages to permit open account imports,” Minister Fernando told parliament.

“We have had good results over the past month. This week we have seen a fall in the price of many essential items.”

Open account imports were barred in May in an attempt to reduce Undiyal premiums, which were driven by foreign exchange outflowing in the country.

Meanwhile Fernando said in addition to a 180 million dollars allocated from an Indian credit line for food, another 160 million dollars will be allocated this week.

We will be able to make more food available, reduce prices over the next few months

Sri Lanka only needs about a us$ 100 million a month for key food imports according to industry officials but a ban on open account imports in May threatened the country’s food supplies as the banks are unable to allocate foreign exchange on time for food, amid forex shortages driven by money printing.

Under open account trade, suppliers can send goods on credit which can be settled later based on their personal relationships.

Perishables have to be cleared quickly from the Port but banks are unable to give dollars in time for importers of most items.

“A big share of essential food imports come from India,” Trade Minister Nalin Fernando told reporters. “They need to get the food out of the exporting country in a day or two and clear them as quickly as possible.

“They give credit and delayed payment facilities because they cannot be kept for a long time. For example, onions and potatoes perish quickly.

Prices of foods moved up after open account imports were banned in May, he said

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