Tuesday, June 18, 2024

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Essential food importers struggle to settle US $ 50mn owed to suppliers

Sri Lanka’s essential food importers are struggling to settle US $ 50 million owed to their suppliers, imported under credit terms, due to the ongoing foreign exchange shortage while facing large exchange losses, owing to the depreciation of rupee.

“US $ 50 million worth of essential items that we have brought through credit terms have already sold, based on Rs.203/US dollar exchange rate. 

We were not informed there were no US dollars when we imported these goods. At the same time, the rupee has depreciated by 40-50 percent over the period, with increasing threat of bankruptcies among our trades,” Essential Food Importers and Traders Association (EFITA) Spokesperson Nihal Seneviratne told reporters in Colombo on Friday. 

Although earlier suppliers shipped their goods based on trust, Seneviratne noted that the suppliers are now demanding payments in advance to ship essential goods, limiting essential food imports  to the country.

At present, there are stocks of essential imported food items (except for food items) sufficient for a one-month period in the country. Thereafter, Seneviratne noted that the country needs to rely on essential goods imported from India, under the US $ 1 billion credit line.

“We are currently in negotiations with the Trade Ministry. We are still not aware of the allocation for essential food items under the US $ 1 billion Indian credit line,” 
he added.

According to the EFITA, the country requires US $ 200 million to import essential goods per month. 

Sri Lanka is facing a shortage of essential commodities such as rice, sugar, dhall, chickpeas, coriander etc as imported stocks are stuck in the Port of Colombo (as far back as November 2021), not being able to clear it in the current foreign exchange crisis, commodity importers complained.

They noted that port rent and container demurrages are accumulating on a daily basis (in some instances the cost per kg was Rs. 35-40), they pointed out.

Members of the Essential Food Commodities Importers and Traders Association have also imported and distributed food items such as dhall and rice on “Suppliers Credit” (DA terms) which are overdue for settlement and some suppliers are requesting payment.

This issue has been brought to the notice of the President in a letter dated March 1, 2022, P.M. Abeysekera, Consultant of Essential Food Commodities Importers and Traders Association said. 

He added that there was a serious threat for food security in the country as most suppliers are reluctant to ship goods to Sri Lanka unless paid in advance.

As the Sinhala and Tamil New Year is fast approaching, the association has urged the President to intervene in this matter of clearing these food items from the port to avoid price hike due to short supply.

The Central Bank has told banks not to request dollars from the banking regulator’s depleted foreign currency reserves, and instead find it in the cash-short market as the country faces a major scarcity of dollars in the forex market.

This has resulted in several private banks being unable to open Letters of Credit (LCs) to importers even for essential items such as pharmaceutical products.

According to a Central Bank directive, commercial banks dealing in the inter-bank foreign exchange market have been restricted in maintaining foreign currency reserves and managing foreign exchange liquidity within the banking system.

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