Sri Lanka food importers hit by US dollar shortage
COLOMBO – Over 1,000 containers of essential food items are stuck at the Colombo port as importers struggled to meet their import bills due to the US dollar shortage in the country.
In recent weeks, prices of most essential goods have skyrocketed due to the falling local currency and high global market prices driven by the COVID-19 pandemic. The government blames traders for hoarding.
Sri Lankan President Gotabaya Rajapaksa on August 31 declared an economic emergency to contain soaring inflation after a steep fall in the value of the country’s currency caused a spike in food prices.
The food importers said that they held talks with Prime Minister Mahinda Rajapaksa earlier in the week to find a solution. They have sought price increases but the government is yet to give the go-ahead.
However, the food importers warned that there will be severe shortages of food items and cooking gas due to this situation.
Consumer Affairs Minister Bandula Gunawardena said the cost of living was expected to rise with retail price hikes of milk, food, gas, wheat flour and cement.
“We cannot hide the fact we are facing a crisis over US dollars while the world market prices are rising. We cannot afford any more concessions,” the minister said.
Gunawardena said the Central Bank would discuss the issue with importers in the coming week. The traders have asked for government intervention for a long-term solution.
The importers had pointed out that due to the insufficient US dollars in local banks, they were unable to clear their goods held up at the Colombo Port.
The importers were told to submit a list of banks they were dealing with, enabling the government to intervene to resolve the issues, a leading importer said.
The traders have warned that prices of essential items could also increase due to the short supply of goods.
The Central Bank is also expected to work out and announce concessions for importers within the next two weeks to prevent a continuous increase in prices of goods, Minister Gunawardena said.
Due to the shortage of US dollars, the government has restricted imports while also taking measures to curb non-essential imports.
President Rajapaksa’s August 31 move declaring an economic emergency is aimed at preventing hoarding of essential items.
The government has appointed a former Sri Lankan Army general as commissioner of essential services, who will have the power to seize food stocks held by traders and retailers and regulate their prices.
The military will oversee the action which gives power to officials to ensure that essential items, including rice and sugar, are sold at government-guaranteed prices or prices based on import costs at customs and prevent hiding of stocks.
The emergency move followed sharp price rises for sugar, rice, onions and potatoes, while long queues have formed outside stores because of shortages of milk powder, kerosene oil and cooking gas. The wide-ranging measure is also aimed at recovering credit owed to state banks by importers.