Governor of central Bank of Sri Lanka (CBSL) Dr. Nandalal Weerasinghe asserts ‘ price reduction were due to maintaining exchange rate at some stable level not due to allowing open account imports. Further to this he stressed the need of a ban of open accounts once again.
Governor noted these at the press briefing held to announce monitory policy review on the 18th.
He explained that as the use of Open Accounts has been limited to some extent, the incentives offered through informal channels such as “Undiyal/Hawala” have decreased over time, resulting in a decrease in the amount of foreign exchange sent through such channels, as well as the use of foreign exchange sent through such channels to fund Open Account-based imports.
The Governor explained that as the exchange rates offered by informal channels have decreased, so have the prices.
“The price reduction is the result of overall policies, not the use of Open Accounts,” he emphasized.
“We have proposed to the Treasury that Open Accounts be prohibited, and the relevant circular will be issued soon,” he said, adding that banks now have the dollars needed to fund essential imports.
Although the CBSL recommended a ban on Open Account imports in June, the ban was lifted with the intervention of the Trade Ministry in order to import 10 essential items using Open Accounts in the same month. Rice, wheat flour, sugar, potatoes, red dhal, onions, dry chilies, dry fish, beans, and milk powder were among the items listed.
Furthermore, Dr. Weerasinghe stated that as a result of policy decisions, foreign exchange could now be allocated to funding the import of fuel and pharmaceuticals, while import expenditure has been significantly reduced.
“Even without short-term credit facilities, we are able to manage the country’s basic needs,” Dr. Weerasinghe said, noting that there has been an increase in the amount of foreign exchange received by the Central Bank through commercial banks.
He mentioned that some businesses have already begun to use the banking system to import rice and milk powder.
Furthermore, he stated that while Sri Lanka has asked the People’s Bank of China to change the terms of the $ 1.5 billion swap’s usability and the Reserve Bank of India to improve the currency swap, the country is managing the situation without those forms of bridging finance.
“I’m not concerned about the money coming in; we have our own system now and can easily finance the imports with our exports and remittances,” CBSL Governor said.