Fresh import limitations imposed on 623 goods
- Central Bank requires 100% cash margin against importation
- Goods include telecommunication devices, televisions, fruits, stationery
- Goal is to preserve exchange rate stability: Central Bank
- Decision despite economists warning of possible retaliation by WTO
By The Morning Business Desk
The Central Bank of Sri Lanka (CBSL) yesterday (9) imposed a 100% cash margin requirement against the importation of 623 selected goods, which according to the CBSL are of a “non-essential”, “non-urgent” nature.
Accordingly, the importation regulation applies to 623 selected goods that are imported under Letter of Credit (LC) and documents against acceptance terms with licensed commercial banks (LCBs) and National Savings Bank with immediate effect.
As such, certain goods in the categories of telecommunication devices; home appliances; clothing and accessories, such as babies’ garments, pyjamas, tracksuits, swimwear, t-shirts, underwear, footwear, watches; as well as certain fruits, beverages, cosmetics, other non-food consumables, such as musical instruments, tobacco products, toys, and stationery are subjected to this order.
Explaining the rationale behind this swift decision, the CBSL stated that this move has been taken to support the ongoing efforts to “preserve the stability of exchange rate and foreign currency market liquidity”, particularly by discouraging “excessive imports of speculative nature”.
The decision to impose more import regulations comes at a time when Sri Lanka received a dollar influx of over $ 1 billion. Two weeks ago, Sri Lanka’s swap agreement with Bangladesh’s Central Bank facilitated an inflow of $ 150 million while $ 737 million was received in the form of Special Drawing Rights (SDRs) from the International Monetary Fund (IMF), along with another renminbi facility of ¥ 2 billion from China Development Bank (CDB).
Sri Lanka’s import controls have already become a serious concern for the World Trade Organisation (WTO) and it is being viewed as a hindrance for fair trade. In the meantime, local economists too have been warning that there is a possibility that WTO may retaliate against Sri Lanka for its restrictions on imports.
The CBSL further said that LCBs are subjected to a few other conditions in terms of importing goods. Accordingly, it is necessary for the cash margin deposit requirements to be on the total value of the invoice although the same invoice includes goods that are not covered by the directive issued by the CBSL.
In a situation where existing LCs account for the importation of goods covered by the aforesaid order, increasing the value of LCs is not permitted by the banks, with the exception of when such an increase is covered by the cash margin deposits as required.
Moreover, banks are ordered not to grant any advances to the customers in order to enable them to reach the minimum cash margin deposit requirement that has been in effect as per the order.
However, banks can certify the particular invoice with the cash margin deposit which has been ordered above. The margin deposit is allowed to be released when the documentary evidence has been provided via both the banking channels and Sri Lanka Customs as imports have been cleared.