The Ministry of Finance issued Import Control Regulations on Payment Terms No.07 of
2022, dated 06 May 2022, and to be effective from 20 May 2022, by restricting the use of
Open Account Payment Terms or Consignment Account Terms, subject to conditions,
when importing goods to Sri Lanka.
This measure complements the various other measures that are being implemented by
the Central Bank of Sri Lanka (CBSL) and the Government in order to improve the foreign
exchange liquidity conditions in the domestic banking system.
It has been brought to the notice of the CBSL that concerns are being raised at various
cohorts of trading community that there will be a large shortage of essential food items
in the country due to the above-mentioned restrictions on payment terms.
Against this backdrop, the CBSL would like to reassure its commitment to ensuring the
availability of foreign exchange within the banking system for the importation of
essential goods, including the food items, in the ensuing period. Further, the CBSL would
like to underscore the following with regard to the arrangements that are being worked
out to ensure that the restrictions imposed on payment terms would not cause shortages
of essential goods, including food items, and they would not result in any hindrances to
manufacturers of export goods.
a) The CBSL is in a continuous dialogue with the banking community in order to ensure
the facilitation of essential goods imports. Following the restrictions imposed on
payment terms and the introduction of the exchange rate determination mechanism,
there has been significant moderation of activity in the grey market. This has resulted
in foreign exchange inflows routing through to the banking system, thereby
increasing foreign exchange liquidity conditions in the banking system. This
momentum is expected to continue in the period ahead, thereby speeding up the
correction of the exchange rate overshoot that took place since March 2022. Such
improvement in the domestic foreign exchange market and subsequent increase in
liquidity conditions would help channel foreign exchange to facilitate imports of
essential goods.
b) The CBSL has commenced negotiations with the Trade Association and other parties
who are engaged in importing essential goods. Accordingly, a preliminary assessment
is being carried out, with the participation of the Ministry of Trade, the Consumer
Affairs Authority, and the Sri Lanka Customs, in order to identify the availability of
stocks of essential goods at present and the monthly requirement of the same in the
ensuing period. Based on such findings, an arrangement would be put in place to
ensure imports of essential goods in required quantities and frequency, along with
the existing arrangement agreed by the Government of India to utilise the existing
line of credit to import essential goods.
c) The Essential Food Commodities Importers and Traders Association assured the
Central Bank during recent discussions that they would not resort to engage in grey
market activity and extend the fullest cooperation in traversing through these
challenging economic conditions. Accordingly, collective efforts would be put in
place to ensure adequacy of essential food items in the period ahead, alongside the
arrangements that are being made under the Indian Line of Credit, among others.
d) The CBSL, the Sri Lanka Customs, and the Ministry of Trade, along with other
agencies, are taking measures to clear the imported goods that are being held at the
Customs, thereby minimising costs to traders while releasing stocks to the market as
a matter of priority.
e) Measures are already underway to facilitate the exporters, when importing raw
material required for their exports, and to utilise their export proceeds to make
payments under open account payment/consignment account terms. Further, local
suppliers, who supply for these exporters, and receive payment in foreign currency,
are also allowed to make payments under open account payment/consignment
account terms.
The CBSL would like to humbly request the trading community and the general public
to act responsibly under these challenging circumstances. Any over-importation and
stock piling of essential goods, including the food items, at the trading community level,
as well as any over-purchasing of the same at the consumer level would be undesirable
under these circumstances. Given the constraints that the country is facing in terms of the
availability of foreign exchange to ensure an uninterrupted supply of essential goods, it
is the duty of all stakeholders of the economy to manage the scarce foreign exchange
liquidity in a calculated manner. Once the country is back on a strong footing and being
able to withstand the pressures on the external front, both the trading community and
the general public would equally benefit in the period ahead.