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Central Bank Governor Dr. Nandalal Weerasinghe on Thursday categorically denied claims that the use of Open Accounts has contributed to the recent reduction in commodity prices, insisting it was a reflection of a raft of measures introduced in recent months.
“Considering data, we notice there is some level of stability in the foreign exchange rate. As a reflection of imposing certain limitations for the Open Account activities, the exchange rates offered by informal channels like Hawala and Undiyal dropped, which led to the commodity price reduction,” he explained to journalists at the post-Monetary Policy Review meeting on Thursday.
The explanation of the banking regulator cleared the air with economic facts after Trade Minister Nalin Fernando recently told the Parliament that reduced commodity prices were due to the Open Account-based imports.
“Certain traders like to claim that the commodity prices dropped because of the Open Account,” he said, adding that the Central Bank has already recommended the Treasury to ban the use of Open Accounts, hoping the circular in this regard will be issued soon.
In June, the Finance Ministry lifted a ban on Open Account-based food imports, following strong lobbying by the essential commodity importers.
Thereafter, at the last Monetary Policy Review in July, the Central Bank Governor claimed that the directive to relax the Open Account for selective imports has reawakened the grey forex market, whilst cautioning the move will create an unnecessary market which was curtailed as a result of the measures first introduced by the Central Bank on 29 April.
Dr. Weerasinghe also assured that the banks now have sufficient foreign exchange to fund essential imports.
“With the raft of measures introduced, we can easily monitor what goods and quantities were brought in and the cost of those post-tax as well as the wholesale and retail price of those. Key essential commodities like rice and milk powder are already being imported using banking sector funds,” he added.
