Connect with us

Business

Lanka imports oil without letters of credit

Published

on

ECONOMYNEXT – Sri Lanka has been importing oil for many months without letters of credit helped by long term relationships, Chairman of state-run Ceylon Petroleum Corporation Sumith Wijesinghe has said, after banks failed honor trade documents due to money printed to keep interest rates low.

Any supplier who sends a shipment without an LC risks non-payment or rejection of a consignment.

While most small shipments take place on open papers shippers usually do not load high value cargo without a letter of credit.

A shipment of oil may cost anything from 40 million to 55 million dollars.

“We have suppliers who have worked with us for years,” CPC Chairman Wijesinghe told reporters in Colombo.

“There is an understanding that the ordered stocks will be purchased. When we order they have to buy it from the producer. If the CPC did not buy it, the supplier has to remove it from that point. Due to relationship we have they load the ship.”

Sometimes tankers wait for two weeks or more off Colombo Port waiting for letter of credit to be opened.

“Even if the LC was delayed they brought the ship,” Wijesinghe said. “Up to now we have not failed to open LC. So we still have that understanding with the suppliers.”

Sri Lanka ran out of foreign exchange due to an extremely unstable reserve collecting soft-peg regime called a ‘flexible’ exchange backed by discretionary ‘flexible’ inflation targeting.

Sri Lanka’s banks lost the ability to honor letters of credit around June 2021 after non-credible peg was enforced by the central bank at around 200 to the US dollar while printing money to keep policy rates low under flexible inflation targeting.

The country started facing shortages of food, fuel and medicines due to flexible inflation targeting, long before it defaulted on debt.

Foreign suppliers started asking for LC to be counter-signed from around late 2020, and in 2021 most stopped endorsing them. Indian banks were counter-signing for a time.

The third rate monetary policy framework eventually drove the country to default after three currency crises in quick succession.

The CPC also ended up with over 3 billion US dollars in debt due to restrictions placed on dollar purchases during previous crises triggered by flexible inflation targeting.

Problems state banks, partly caused by CPC dollar loans, led to progressive cuts in risk limits by foreign counterparties and country limits, long before the country officially defaulted.

On April 12 Sri Lanka would not make payment on foreign debt, because the country lost the ability to do so, even though the desire to pay was there.



Continue Reading
Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Business

Ceylon Chamber’s Investment Summit 2026 to steer Sri Lanka beyond stabilisation

Published

on

President Anura Kumara Dissanayake will inaugurate the Sri Lanka Economic and Investment Summit 2026 today, at the Shangri-La Colombo

Sri Lanka’s national economic discourse takes center stage today as the country’s premier private-sector body, The Ceylon Chamber of Commerce, hosts the Sri Lanka Economic & Investment Summit 2026 at the Shangri-La Colombo.

Convening on October 12 and 13, the two-day summit brings together an influential gathering of senior policymakers, international financiers, multilateral development partners, and private-sector captains to chart the island’s next phase of macroeconomic growth.

Held under the theme “Positioning Sri Lanka in a Changing Global Economy: Resilience, Reform, and the Future of Economic Policy,” this year’s forum marks a critical inflection point in the nation’s post-crisis trajectory.

As Sri Lanka shifts its emphasis from immediate financial stabilization toward sustainable, long-term expansion, the summit aims to address the structural imperatives necessary to secure high-impact foreign direct investment (FDI), deepen regional trade integration, and unlock emerging sectors of economic activity.

The core agenda over the two days focuses on building resilience across volatile global market cycles while executing targeted policy reforms. Key working sessions will examine:

Regional Value Chains & Trade Integration: Leveraging Sri Lanka’s strategic Indian Ocean geography to capture higher-value export flows and commercial linkages.

Energy & Infrastructure Transformation: Accelerating renewable energy integration and modernizing national utility policy.

Digital Economy & Public Modernization: Deploying digital technologies across public administration and financial services to enhance operational efficiency and transparency.

Sectoral Priorities: Modernizing healthcare infrastructure and agricultural value-addition to build a robust domestic economic base.

A defining feature of this year’s summit is the strong convergence between state policy and global commercial expertise. Keynote addresses and panel discussions will feature prominent leaders, including Prime Minister Dr. Harini Amarasuriya and T. Krishnakumar, Chief Executive Officer of Reliance Consumer Products Ltd.

They will be joined by senior delegations and policy experts from major global institutions, including:

= The Asian Development Bank (ADB)

= The International Finance Corporation (IFC)

= Standard Chartered Bank

= Zydus Lifesciences

The active participation of the country’s highest executive and legislative leadership across both days underscores a clear policy commitment to private-sector-led growth. By establishing a direct, high-level platform for dialogue between investors and policymakers, the Ceylon Chamber’s summit seeks to refine regulatory frameworks, improve the ease of doing business, and establish a clear, predictable environment for capital formation in the years ahead.

Continue Reading

Business

White House blocks Microsoft from foreign worker hiring programme

Published

on

The White House has often made extreme claims regarding international workers and immigration

Microsoft and several other technology firms have been barred by the White House from hiring skilled international workers on a permanent basis through a widely used visa programme.

US Vice-President JD Vance on Thursday accused Microsoft alongside other firms of committing fraud through the use of the H-1B visa programme and a related process for workers from abroad to become permanent US residents.

Vance claimed that Microsoft, one of the most valuable companies in the US, has been effectively replacing American workers with “foreign indentured servants.”

Microsoft said most of the H-1B visas filed over the last financial year were for existing workers, who are paid the same as local staff.

“No company in the US has abused this system more than Microsoft,” Vance said.

He also made similar accusations about Adobe, Cognizant, Infosys, Tata, Wipro, HCL and Capgemini.

The US government will not process any new or pending Permanent Labor Certification Program (PERM) applications from Microsoft or the seven other companies, Secretary of Labor Keith Sonderling said during the same conference.

Sonderling said companies like Microsoft, as well as US universities, have turned into “visa mills” that were “flooding” the US with foreign workers.

The BBC has contacted all of the companies for comment.

The total number of H-1B visas, a precursor to anyone seeking to go through the PERM process, is capped at 85,000 per year.

A spokeswoman for Microsoft noted to the BBC that “the vast majority of Microsoft employees in the United States are Americans.” The company employs more than 200,000 people worldwide.

Continue Reading

Business

ComBank unites stakeholders to prepare agri sector for El Niño

Published

on

El Nino awareness programmes conducted by the Bank

In response to emerging climate risks, the Commercial Bank of Ceylon has launched a proactive initiative through its Development Credit Department, to equip Sri Lanka’s agricultural sector against the potential impacts of the 2026 El Niño climate pattern.

Seeking to move the industry from reactive loss management to early climate preparedness, the Bank partnered with leading state universities to execute a two-part educational and technological intervention in September 2026.

The initiative comes at a critical juncture. Sri Lanka’s Department of Meteorology reported an 80% probability of El Niño conditions emerging between June and August 2026, with effects expected to persist through November and beyond. As highlighted by the Food and Agriculture Organization (FAO), El Niño acts as a risk multiplier for rural livelihoods, food production, and water supply.

To mitigate these threats, the Bank’s initiative creates a collaborative network uniting academic institutions, agricultural extension services, technology providers, farming communities, and the financial sector. The awareness programme on El-Niño and its impact on agriculture was supported by 12 Commercial Bank branches, and engaged with more than 1,100 farmers at 15 diverse locations, including Vattapalai, Muththajankaddu, Palampas, Oddusuddan, Siyambalanduwa, Lindula, Neluwa, Kalawana, Pannala, Madampe, Mannar, Vavuniya and Kumalamunai.

Continue Reading

Trending