The Ministry of Finance has issued Import Control Regulations on Terms of Payment No. 07 of 2022, dated May 6, 2022, which will come into force on May 20, 2022, restricting the use of terms of payment in open account or consignment account conditions, subject to conditions, when importing goods into Sri Lanka.
This measure complements the various other measures implemented by the Central Bank of Sri Lanka (CBSL) and the government to improve foreign exchange liquidity conditions in the domestic banking system.
It has come to the attention of the CBSL that various cohorts in the trading community are concerned that there is a severe shortage of essential food items in the country due to the aforementioned restrictions on payment terms.
In this context, the CBSL wishes to reassure on its commitment to ensure the availability of foreign exchange within the banking system for the import of essential goods, including foodstuffs, during the coming period. In addition, the CBSL would like to highlight the following with regard to the arrangements being worked out to ensure that restrictions on payment terms would not lead to shortages of essential goods, including food, and that ‘they would not impede any obstacle to the manufacturers of export products.
a) CBSL is in continuous dialogue with the banking community to ensure the facilitation of essential goods. gray market activity moderation . This resulted in the channeling of foreign currency inflows into the banking system, thereby increasing the conditions for foreign currency liquidity in the banking system. This momentum is expected to continue in the coming period, thus accelerating the correction of the exchange rate overshoot that has taken place since March 2022. Such an improvement in the domestic foreign exchange market and the subsequent increase in liquidity conditions would help to channel foreign exchange to facilitate imports. essential goods.
b) CBSL has entered into negotiations with the Trade Association and other parties who import essential products. in order to identify the availability of stocks of essential goods at the present time and the monthly needs of these during the following period. Based on these findings, an arrangement would be put in place to secure imports of essential goods in the required quantities and frequency, along with the existing arrangement agreed by the Government of India to use the existing line of credit to import goods essential.
c) The Association of Essential Food Importers and Traders has assured the Central Bank in recent discussions that it will not resort to gray market activity and will cooperate fully to get through these difficult economic conditions. Accordingly, collective efforts would be put in place to ensure the adequacy of essential food items in the coming period, alongside the arrangements made under the Indian Line of Credit, among others.
d) The CBSL, Sri Lanka Customs and Ministry of Commerce and other agencies are taking steps to clear imported goods that are held up at customs, thereby minimizing costs for traders while freeing up inventory in the market as a matter of priority.
(e) Measures are already underway to assist exporters, when importing the raw materials needed for their exports, and to use their export proceeds to make payments under open account/consignment account payment arrangements. In addition, local suppliers, who supply these exporters and receive payments in foreign currencies, are also allowed to make payments under open account/consignment account payment terms.
CBSL humbly wishes to ask the trading community and the general public to act responsibly in these difficult circumstances. Any over-importing and stockpiling of essential goods, including foodstuffs, at the level of the trading community, as well as any over-purchasing of them at the level of the consumers would be undesirable under these circumstances. Given the constraints the country faces in terms of the availability of foreign exchange to ensure an uninterrupted supply of essential goods, it is the duty of all actors in the economy to manage the scarcity of foreign exchange liquidity in a calculated manner. Once the country regains solid foundations and is able to withstand external pressures, the business community and the general public will also benefit in the coming period.