By:Staff WriterColombo (LNW): Sri Lanka motor traders are facing difficulties in the importation of vehicles mainly for passenger and goods transportation as the Letters of Credit issued by local banks are still not acceptable for foreign banks although the government has lifted restrictions.
State minister for finance Ranjith Siyambalapitiya said that the ministry will intervene to solve the issues of vehicle importers.
Sri Lanka is looking at the possibility of giving a government guarantee as letters of credit issued from the island to import commercial vehicles are still not internationally recognized, He said.
Sri Lanka this month lifted a ban on the import of buses and several types of truck, imposed during a currency crisis triggered by rate cuts enforced with printed money, which eventually ended in sovereign default.
Suppliers who met the Minister this week have complained that they are facing difficulties in importing commercial vehicles as Sri Lankan Letters of Credit are still not recognized abroad.
As the currency crises worsened in 2021 and 2022 importers had to pay extra fees to foreign banks to double confirm LCs issued by Sri Lankan banks.
The ministry will explore the possibility of introducing a fresh scheme that will allow the opening of Letters of Credit (LCs) where foreign exchange can be sent from another source and not from Sri Lanka.
Foreign banks are refusing to confirm letters of credit issued by Sri Lanka state banks, and vehicle manufacturers and suppliers are also rejecting them, motor traders said.
They pointed out that it breaches Uniform Customs and Practice (UCP 600) regulations that govern international trade of banking. Most of those LCs are basically insured by a foreign bank for payment default, they disclosed.
Efforts were made to get Standard Chartered Bank and some Indian banks to confirm the Letter of Credit but they had declined.
Some supplier then tried to get the trade credit approved by a financial institution affiliated to them, but a few days later the agency had also refused, they claimed.
Under this set up the motor traders will have to look for India and China to get line of credit to bring down buses and trucks needed for passenger and goods transportation they informed the minister.
Three years after its financial crisis, Sri Lanka is set to re-open its doors for the imports of commercial vehicles, construction equipment, and electric vehicle makers, starting September 2023, Sri Lankan State Finance Minister Shehan Semasinghe said in an interview with Autocar Professional.
He said that the Indian auto industry, especially manufacturers such as Tata Motors, TVS Motor, Ashok Leyland, and Bajaj Group, has been deeply engaged with the Sri Lankan manufacturing sector and the country ‘completely recognises their importance’.
India has re-extended a credit line of US$ 1 billion to Sri Lanka, which has enabled the country to buy goods and services from India.