ECONOMYNEXT – Sri Lanka’s banking regulator has given the go-ahead for transactions with Iranian banks for tea shipments, enabling a recovery in exports to the Persian Gulf country, one of the top buyers of the island’s main agricultural commodity.
Minister of Plantation Industries Naveen Dissanayake said tea exports to Iran fell by almost 20% in 2017 from the year before owing to economic sanctions that affected payments, where direct remittances through banks were not possible.
“Exporters were finding it difficult to collect payments for tea exports,” he told a news conference.
With the central bank now giving the go-ahead for payments, by next year a recovery in tea exports to Iran could be expected, Dissanayake said.
Ceylon tea exports to Iran fell 19% to 27.4 million kilos in 2017 from the year before. Iran is the fourth largest market with a 9.5% share of total Ceylon tea exports, down from almost 21% in 2016, according to the Tea Board.
The restrictions on remittances from Iran were a result of the sanctions imposed, which the Ministry of Plantation Industries and the Sri Lanka Tea Board had taken up with the Ministry of Foreign Affairs and the Central Bank, a statement said.
The central bank was exploring the possibility of setting up a banking and payment arrangement between Sri Lanka and Iran for the purpose of facilitating Ceylon tea exports to the Iranian market, it said.
The Tea Exporters Association had said that if the Central Bank was successful in introducing a payment mechanism, tea exports to Iran could increase in 2018.
Tea Board Chairman Rohan Pethiyagoda said that under the arrangement tea exporters and buyers could trade in euros, not US dollars.
“The central bank has approved trade with Iranian banks for tea only,” he said.
Sri Lanka had sought and got clarification from the US State Department to ensure there was no objection to trade in tea, which is categorised as a food product and had not been subject to sanctions.
Remittances for tea exports had been delayed because of US sanctions imposed on certain Iranian individuals and institutes to block any dealings with the US financial system, that prevented direct transactions in dollars.
As a result, Sri Lankan tea exporters had been unable to get payments for shipments through Iranian banks.
(COLOMBO, January 26, 2018)