Central Bank recommends Finance Ministry to ban all open account imports

• Says Treasury is expected to issue a circular in this regard soon
• Points out banking system has enough forex to fund essential imports 
• Claims recent decline of commodity prices not because of open account imports
• Effective date for clearance of essential food commodities under open accounts extended until Aug. 31

The Central Bank (CB) has requested the Finance Ministry to completely ban imports under open account

payment terms while stressing that the banking sector has sufficient foreign exchange to finance essential imports.

“We have proposed to ban open account trade. The Treasury is expected to issue the relevant circular soon. As of now, we believe that the banking system has sufficient foreign exchange to finance essential imports,” Central Bank Governor Dr. Nandalal Weerasinghe said. 

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 recently told parliament that relaxation of the open account trade has played a role in the decline of prices of essential goods in the market. However, Dr. Weerasinghe refuted these claims.
“As a result of the restrictions imposed on open account activities, the exchange rates offered by informal channels such as Hawala and Undiyal declined and consequentially the retail prices of commodity prices also declined.

Although, certain traders like to claim that commodity prices dropped because of open account, there were a number of other policy decisions and measures which contributed to this decline including imports under Indian credit line,” Dr. Weerasinghe stressed.
He further noted that some of the essential commodities such as milk powder and rice were imported with the foreign exchange provided by the banking sector.

Meanwhile, the Minister of Trade and Food Security this week issued a notice extending the effective date for clearance of essential food commodities for approved importers under open account payment Terms until 31st of this month.