“We see a lot of money going through the Hawala / Undiyal systems,” said Governor Weerasinghe. “Sometimes they are for imports that are not necessary.” About 25 percent of the country’s $ 1.6-1.8 billion a month is in open accounts and another 12 percent in pay-as-you-go (DA / DP) documents, central bank officials said. “Some imports are made through an open account or DA / DP terms instead of letters of credit (LC) and arrangements are made outside the banking system. Weerasinghe said the Treasury Department would soon issue a statement to the newspaper through the Import and Export Control Act. “It will take some time and then confirmation will have to be made that the settlements will be made only by the banking system. This is the type of mechanism that is invented. “ The Import and Export Control Act was enacted in 1969 when economists / Mercantilists printed money through the central bank of the islands’ interim regime and caused trouble for an administration led by then-Prime Minister Dandley Sennayake. Sri Lankan parallel rates for Undiyal transfers are around Rs 400 per dollar or higher compared to approximately US $ 365 for the currency deficit banking system. Currency shortages are caused by the printing of extra money by the central bank which increases credit and imports. Parallel exchange rates arise when the rupees trying to leave the country are greater than the inflows. At the moment there is a demand for delivery (purchases of dollars by the central bank for new money, despite the distressed foreign exchange) that critics say tends to push the currency down. Currency shortages and balance of payments crises are a problem that characterizes countries with “flexible exchange rates”, which are neither clear nor hard commitments. A flexible exchange rate or soft-peg collapses causing balance of payments deficits and parallel exchange rates (the commitment loses credibility) when economists print money to delay market rate hikes resulting from rising or rising interest rates. budget deficits. However, Governor Weerasinghe had taken the right step by raising policy rates to 14.50 per cent from 7.50 per cent and bond yields are now around 22 per cent, which will ultimately limit the bank credit that converts private savings on imports through construction or consumer spending. Related Sri Lanka could cause food shortages such as medicines with new commercial controls: Bellwether Concerns have been expressed that any attempt to force food importers to open Letters of Credit before private credit falls and foreign exchange shortages end could lead to food shortages such as medicines and fuel. When banks stopped issuing letters of credit as they could not find enough dollars due to the money the central bank was printing, creating shortages of medicines and fuel, Sri Lankan commodity importers kept people supplied with open-account imports and settlements. Undiyal. Undiyal allowed them to bid at a higher market rate, give a better interest rate to expatriate workers, and prioritize foreign exchange to feed people who use the free market. (Columbus / April 29, 2022)
