ECONOMYNEXT – The Sri Lankan government has permitted milk powder importers to use open account to bring in the essential commodity with an aim to reduce public anger against shortages of milk powder. But the move comes despite the central bank’s concerns over open accounts.
Sri Lanka, banned open accounts in May in an attempt to reduce Unidyal style net settlements being made for what officials called ‘non-essential’ imports.
However the ban on open account trade also hit food imports, which are usually imported long term relationships on suppliers credit.
The open account method payments are estimated between 150 to 250 million US dollars a month for food imports, according to industry officials.
Sri Lanka’s Central Bank has not been in favour of relaxing the ban citing that Sri Lanka has sufficient foreign exchange to finance essential imports.
“As a reflection of imposing certain limitations for the Open Account activities, the exchange rates offered by informal channels like Hawala and Undiyal dropped, which led to the commodity price reduction,” Weerasinghe
said at the Monetary Policy Review meeting in August.
Essential commodities like rice, wheat flour, sugar, potatoes, red dhal, onions, dry chillies, dry fish, beans and milk powder are imported using open account.
Sri Lanka witnessed long queues for milk powder throughout the year alongside massive price increments due to Sri Lanka’s collapsing rupee. (Colombo/Nov01/2022)