Dollar Crisis: Dollar around 250, shipping agents seek dollarized payments amid forex trouble


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  • Aug 28, 2021
    Sri Lanka’s shipping agents have asked for dollarized freight charges, a report said as foreign exchange shortages intensified amid low interest rates and liquidity injections.

    “The current US dollar shortage in the banking system has made it difficult to convert any rupee collections of freight to US dollars in order to make the remittances to principals,” Sri Lanka’s The Sunday Times newspaper quoted the Ceylon Association of Shipping Agents representing lines as saying.

    “Hence shipping lines are forced to request exporters to pay freight in US dollars.”

    Exporters have been told by shipping lines to pay freight in dollars and they in turn have raised the matter with Sri Lanka’s Export Development Board.

    CASA had warned that delays in paying principles could reduce freight allocations for Colombo compared to other countries where payment are made faster, and this may make it difficult for exporters to meet customer deadlines, the newspaper said.

    “The average value of export freight per month is US$ 100 million and it is vital for shipping agents to retain foreign funds held in Principals’ accounts to meet on going disbursements as well as remit funds to Principals in accordance with the Agency Agreements between Principals and Shipping Agents,” the CASA was quoted as saying.

    Sri Lanka has printed around 1.6 trillion rupees from January 2020 to November 2021 and lost 5.6 billion US dollars in balance of payments deficits up to October 2021.

    About 350 billion has been absorbed in a reserve money expansion and inflation.

    Holders of rupees now find it difficult to convert to dollars at the 200 to the US dollar soft-peg as its credibility has been lost due to two years of money printing to maintain low interest rates.

    Parallel exchange rate are now around 250 to the US dollar.

    Under severe monetary instability involuntary market dollarization takes place.

    Analysts have suggested that dollarization be encouraged to get over the barrier of converting dollars to rupee and back again, especially for the government.