Sri Lanka President liberalizes fertilizer imports

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe has allowed fertilizer to be imported on open account terms without first opening a letter of credit in the latest relaxation of regulations to boost food supplies.

Nitrogen fertilizer including urea, ammonia, sodium fertilizer, super phosphate, potassium chloride, potassium sulphate and mixtures of fertilizer are allowed to be imported under open account terms.

Open account imports of fertilizer will be allowed from December 21 to June 2023.

Sri Lanka banned open account imports in May 2022 in the belief that it contributes to parallel exchange rate premiums, though analysts pointed out that such premiums come from credit printed money and credit given from central bank liquidity injections.

In April 2022 the central bank hiked its own policy rate to 15.5 percent and stopped controlling longer term rates with printed money taking the required action to stop further meltdown of the rupee and probable hyper-inflation.

Sri Lanka also faced the possibility of food shortages due to the open account ban.

However President Wickremesinghe allowed open account imports of food, leading to a gradual stabilization of imported food prices. He also allowed maize, a the main ingredient in poultry feed to be imported under open account terms.

With negative private credit, kerb market premiums have now evaporated. (Colombo/Dec23/2022)