It is reported that recently, shipping agents in Sri Lanka warned that due to the ongoing serious foreign exchange crisis in the island country, shipping companies are unable to remit freight charges, so shipping companies may stop accepting import and export goods to and from Sri Lanka.
A local agent told Shipping and Aviation Minister Nimal Siripala de Silva that Sri Lanka’s failure to remit freight charges to shipping companies in the past few months has reached as much as $70 million. It has been facing a severe foreign exchange crisis, with its available foreign exchange reserves falling to less than $50 million in May.
It can be seen that Sri Lanka is facing its most serious economic crisis since independence in 1984.
At the same time, Sri Lanka’s foreign debt is as high as US$51 billion! The amount that needs to be repaid this year is as high as 7 billion. On May 19, Sri Lanka also defaulted on its sovereign debt for the first time since independence. This default also seriously damaged its international reputation and made it more difficult to borrow the funds it needs in the international market.
Due to the shortage of foreign exchange, import bills are facing a huge crisis, and the prices of daily necessities have reached an all-time high.
The Ceylon Association of Shipping Agents (CASA), led by its chairman, also raised the issue when discussing key issues in the shipping industry with the newly appointed minister.
She warned that shipping lines may decide to abandon services to Sri Lankan ports as due freight rates rise. As a solution, she suggested the minister allow shipping lines to pay port charges in rupees by October.
Cash-strapped Sri Lanka has decided to collect all payments from the Sri Lanka Ports Authority (SLPA) in US dollars instead of local currency from June 1 to replenish its foreign exchange reserves.
But shipping agents pointed out that they cannot pay all in US dollars as they have received several rupee payments from shippers.
At the same time, the port authority waived US$20 million in demurrage fees for importers who were unable to clear customs from the port in time due to delays in bank release of foreign currency.
The foreign exchange crisis has left some importers unable to obtain foreign exchange for weeks, so their goods cannot be shipped from the port. This has caused the goods to be stored in port yards for an extended period of time and will incur demurrage charges.
Worse still, in some cases, the demurrage charges exceed the value of the goods in the container.
The President of Sri Lanka had requested the port authorities to waive demurrage charges to assist the country’s import trade.
“We have waived approximately $20 million in demurrage and have sent it to the department for approval,” the Port Authority chairman said.
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