SL in talks for credit lines for big ticket imports to alleviate pressure on BoP

• Authorities hopeful the move would lessen current difficulties faced by importers to a greater extent when opening LCs
• The most recent round of discussions on the matter was held between Finance Minister and CB last Wednesday

Sri Lanka is holding discussions to explore the possibility of obtaining credit lines from importing countries for big ticket imports such as petroleum to lessen the burden on the foreign exchange and thereby the balance of payment created by the pandemic induced challenges on foreign exchange earnings such as tourism, exports and envisaged direct inflows. 

If there is a breakthrough out of the discussions, the authorities are hopeful that the current difficulties facing the importers when opening Letters of Credit could be lessened to a larger degree until the foreign inflows are gradually restored with the expected easing of the pandemic. 

“There are goods (in the import basket) which have a higher weightage on the balance of payment in the country such as petroleum and other big ticket imports such as dhal”, said the Central Bank Governor, Professor W.D. Lakshman.  

“So, what we strive to is to obtain a credit line from the importing countries and by doing so to reduce the burden on our current export earnings and then take a bit more time to settle such imports (bills)”, he added. 

Sri Lanka is facing one of the worst economic crises since 1970s with rising commodities prices, foreign exchange shortage and enormous challenges to its output and, public and personal income generation created by a once in a century health crisis brought about by a fast spreading virus which gripped the entire world since the beginning of 2020. 

As the pandemic and its economic ramifications appear more long lasting than anybody would have hoped for, such as further delay in the rebound in the tourism trade which has potential to generate over US$ 4.5 billion in foreign incomes and slowdown in both merchandise and services exports revenues, the authorities are exploring various options to minimise the economic damage inflicted to the general public.

Sri Lankan government reluctantly locked down its economy for 10 days through August 30 last week as there was a growing chorus from many quarters to impose stay-at-home orders to prevent anymore spread of the virus and also to reduce the fatalities which are closing in 200 a day.

However, if the country is compelled to keep its economy closed beyond August 30, the people were asked to be ready to make more sacrifices economically as the Sri Lankan economy has run out all of its buffers barring a well functioning economy since last year,  President Gotabaya Rajapaksa said on Friday addressing the nation.   The most recent round of discussions on the matter of seeking import credit lines had been held last Wednesday between the Finance Minister and the Central Bank. 

“What we heard was that a decision had been taken with regard to a couple of goods. Nevertheless this is a matter that we are expecting to resolve in the period ahead”, Professor Lakshman added.