CB Governor Nandalal to get the blame for creating food shortage soon
Sri Lanka is definitely to face a severe shortage of essential food items by the end of next month following the ban on open account transactions by the Central Bank pushing importers out of business, essential commodity importers warned.
They noted that if there is shortage of essential food and unbearable price hike in the country then CB Governor Nadalal Weerasinghe should bear the responsibility as the Trade Ministry is against arbetary decision.
The government on the recommendation of the CB banned open account-based imports in May. However, the ban was relaxed to allow importation of 10 essential goods under open account payment terms in June.
The Minister of Trade and Food Security Nalin Fernando noted that relaxation of the open account trade has played a role in the decline of prices of essential goods in the market. However, Weerasinghe refuted these claims.
Sri Lanka has avoided a food shortage from July to mid-August following a decision to relax open account imports for 10 essential foods, in conjunction with a fuel distribution scheme for local suppliers and traders, Trade Minister Nalin Fernando said.
“The Ministry took great pains in getting the monetary authority to re allow the import of 10 essential items but the reimposition of the ban will definitely create food shortages in the country,” trade ministry sources said.
. Following the relaxation of import restrictions on essential food items and lifting the ban on open account transactions the Trade ministrty has been able to meet essential food commodity needs without shortages, and also to reduce prices through competition,” said MinisterFernando.
Open account imports for 10 essential items are permitted earlier, making importers bring down rice, wheat flour, sugar, potatoes, red dhal (lentils), onions, dry chillies, dry fish, beans and milk powder.
If there are any shortages in these commodities in the coming months, the Central Bank Governor should answer to the consumers as the ministry cannot take the responsibility, a senior official said.
Open account imports allow food to be cleared on suppliers’ credit which can be settled later through official or unofficial means. 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 also hit food imports, which are usually imported long term relationships on suppliers credit. It is estimated that the island needs about 150 to 250 million US dollars a month for food imports according to industry officials.
A senior member of the Essential food commodity importers association who did not wish to be named said that he will be forced to close down his business and ask employees to leave if he cannot import through any other method.
He claimed that most of the importers and traders in Pettah have enough stocks for only one month due to storage problems.
“When the dollar rate was at Rs. 203, we purchased it at Rs. 300, and now it’s over Rs. 400, but not all sellers have enough dollars in one place,” another importer said.
He adding that they are spending large amounts on buying dollars at a higher price and selling products at a lowered margin, sometimes at a loss, only because they want to continue doing business and provide food for people.
. Further, he said that although he and many other essential food item importers in Pettah have submitted applications to obtain dollars from the credit line provided by India for essential imports, there has not been a response from the authorities for two months