Lanka slaps 100 per cent LC margin to restrict imports

Sri Lanka has imposed a 100 per cent cash margin on letters of credit (LC) for over 600 items ranging from chocolates and wine to raincoats and carpets to discourage unnecessary imports as the country is facing a severe foreign exchange crisis.

The decision was taken by the Monetary Board of the Central Bank of Sri Lanka at its meeting held on Wednesday. The board issued the order under the monetary law. The new margin requirement will be in effect from September 8 for over 600 items ranging from chocolates and wine to raincoats and carpets to discourage imports, it said.

The licensed commercial banks have also been barred from giving credit for importers to meet the margins. Licensed commercial banks “shall not grant any advances to their customers for the purpose of enabling such customers to meet the minimum cash margin deposit,” the Central Bank said.

The directive has described 693 items through customs codes including, chocolates, spaghetti, apple juice, wine, oats, soya milk, dairy goods, lipsticks, carpets, coats anoraks and electronic goods. Finance Minister Basil Rajapaksa told parliament that Sri Lanka was facing a severe external crisis as well as a domestic crisis with revenues falling and expenses continuing to rise.