ECONOMYNEXT- Sri Lanka exporters who managed to persuade customers to send advance payments are in trouble as banks force-convert the dollars before the order is shipped, citing a central bank repatriation rule, an exporter said.
Sri Lanka’s central bank tightened repatriation rules and asked exporters over the past two years after money printing triggered forex shortages.
Exporters have to convert residual dollars after paying for inputs and some other expenses such as loan settlements.
Exporters usually get a letter of credit from the buyer and dollars are paid after goods are shipped. In order to win business, Sri Lanka exporters are sometimes forced to give credit to buyers abroad.
But exporters with long term relationships with buyers are sometimes able to persuade them to pay in advance for a part or whole of the order.
“I got my customer to pay in advance but my bank converted the dollars on the 7th of the month before I could get the raw materials,” an exporter said.
“Now I do not have dollars to pay for inputs. I also have to pay for shipping, which is a large part of the cost. I have to keep some dollars for shipping.
“Banks are supposed to convert dollars only after the goods are shipped not before to my understanding of the gazette. But banks are interpreting it to convert dollars before shipment. Nobody will ask for advance payment under these circumstances.”
According to a gazette notice issued by the central bank in 2022, exporters were expected to
“mandatorily receive the export proceeds in Sri Lanka, in respect of all goods exported and/ or services provided outside Sri Lanka, within one hundred and eighty (180) days from the date of shipment or provisioning of services’ and covert the dollars by the 7th of the following month.
“But advance payments are not export proceeds,” the exporter pointed out. “The export has not yet been made.”
The problem is acute for smaller exporters who do not have a steady stream of buyers and when a large buyer is involved in a give period, he said. Exporters who do business with at least two banks have the problem. (Colombo/Jan22/2022)