FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com


Join the forum, it's quick and easy

FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com
FINANCIAL CHRONICLE™
Would you like to react to this message? Create an account in a few clicks or log in to continue.
FINANCIAL CHRONICLE™

Encyclopedia of Latest news, reviews, discussions and analysis of stock market and investment opportunities in Sri Lanka

LISTED COMPANIES

Submit Post


ADVERTISE
Poll

EXCHANGE RATE PREDICTION: 2022

 
 
 
 

View results

ශ්‍රී ලංකා මූල්‍ය වංශකථාව - සිංහල
Submit Post


CONATCT US


Send your suggestions and comments

* - required fields

Read FINANCIAL CHRONICLE™ Disclaimer



Latest topics

» The war in Ukraine is no longer shocking the wheat market
by ResearchMan Today at 2:10 pm

» India raises import tax on gold to support rupee and amid trade deficit
by ResearchMan Today at 2:09 pm

» When will supply chain disruptions ease?
by ResearchMan Today at 9:57 am

» KHL Massive forex gains close to 6 billions
by rajini Yesterday at 10:54 pm

» Tourism in Sri Lanka: One step forward, two steps back
by rajini Yesterday at 9:21 pm

» Expolanka to continue its winning streak
by samaritan Yesterday at 4:12 pm

» Govt gets its priorities wrong
by samaritan Yesterday at 10:25 am

» Ambassador assures U.S. support to Sri Lanka to find solutions to economic issues
by samaritan Yesterday at 10:16 am

» IMF-Sri Lanka bailout talks end without a deal
by ChooBoy Yesterday at 9:16 am

» Sri Lanka Breaks Into Hyperinflation Zone Amid Dollar Crunch
by CHRONICLE™ Yesterday at 8:11 am

» Sri Lanka needs to do more on debt restructuring before a bailout package is finalised, says IMF
by CHRONICLE™ Yesterday at 8:06 am

» Global COVID cases rise as BA.4 and BA.5 expand
by samaritan Yesterday at 7:04 am

» POSITIVES & TARGETS BY IMTIAZ BUHARDEEN
by Gowri123 Wed Jun 29, 2022 4:38 pm

» We’re seeing a shift toward international and value stocks, says Schwab’s Kleintop
by target1 Wed Jun 29, 2022 2:40 am

» Wall Street stumbles as consumer pessimism stokes growth fears
by target1 Wed Jun 29, 2022 2:34 am

» Free Market Capitalism vs. Crony Capitalism
by target1 Wed Jun 29, 2022 2:30 am

» Sri Lankan corporations reap large profits as workers and rural toilers face poverty and starvation
by CHRONICLE™ Tue Jun 28, 2022 6:37 pm

» අද රාත්‍රියෙන් පසු, යක්ෂයාගේ හෝරාව ඇරඹේ!
by God Father Tue Jun 28, 2022 6:13 pm

» Derana 360 with Minister Dhammika Perera
by samaritan Tue Jun 28, 2022 1:07 pm

» CENTRAL INDUSTRIES PLC (CIND.N0000)
by LHW Tue Jun 28, 2022 9:24 am

EXPERT CHRONICLE™

MARKET CHAT


CHRONICLE™ ANALYTICS


ECONOMIC CHRONICLE

GROSS DOMESTIC PRODUCT (GDP)


CHRONICLE™ YouTube

LATEST TWEETS

You are not connected. Please login or register

FINANCIAL CHRONICLE™ » CORPORATE CHRONICLE™ » Sri Lanka firms with billions in trade credits exposed as rupee falls

Sri Lanka firms with billions in trade credits exposed as rupee falls

Go down  Message [Page 1 of 1]

CITIZEN

CITIZEN
Manager - Equity Analytics
Manager - Equity Analytics


[size=18]ECONOMYNEXT – Companies with suppliers’ credit and dollar debt are facing large forex losses as the Sri Lanka rupee falls steeply after two years of unusual money printing to keep interest rates down as budget deficits expanded.
In the stock market, punters have been betting on exporters and also companies with overseas operations and assets, which will see translation gains as the domestic currency inflates according to the monetary policy.
Hotels and export firms also have dollar loans but are hedged with future dollar revenues as repayments fall due.
Domestic firms which could raise prices as the rupee falls could also potentially get more future rupee revenues to dollars to repay foreign debt.
However, suppliers’ credits are short term and face an immediate loss especially if stocks have been sold already based on a too low exchange rate.
If a company with suppliers’ credit still has stocks to match the credits, the firm could price up the products and get more rupees to buy dollars.
Forex Exposure
Financial intermediaries say many firms including unlisted firms are stuck with unsettled credits.
“As of the year-end, the Group has a significant amount of foreign currency outstanding trade debts due to foreign suppliers, on which any adverse fluctuations in the exchange rates would have a material impact on the Group’s profits,” Executive Director, Chief Executive Officer of publicly-traded Ceylon Grain Elevators told shareholders when the latest quarterly accounts were released.
CGE said as of December 2021 it had 28.3 million dollars of trade dues which was 5.7 billion US dollars at the exchange rate then prevailing.
On December 31, 2021, the rupee was around 203 to the US dollar. The rupee has since fallen to around 265 to the US dollar valuing the debt at 5.7 billion US dollars.
Over the fears of the rupee falling soon, some companies also avoided bringing down stocks as they had done in the past.
Adrian Basnayake, the Past President and Council member of the Sri Lanka Chamber of the Pharmaceutical Industry said a shortage of drugs in the country caused by forex shortages was intensified by fears of getting down stocks and being unable to pay on time.
“Let’s say we get to open an LC for 203 rupees,” Basnayake told reporters before the rupee was allowed to fall according to the monetary policy stance.
“Usually we settle prices after around three months after importing the medicine. But if the Dollar rate has increased to 245 rupees within that three months, who will bear that cost?
“We do not have the capacity to cover that cost. Due to this, importers stop importing and that is another reason for the lack of medicine in the market.”
The rupee has since fallen below 245 to US dollars.
Trade Credits
According to official data trade credits rose steeply over 2021. From January 2021 to September 2021, trade credits went up by 478 million US dollars.
Firms cleared goods, sometimes with support from parent companies to keep the population supplied with foods and other goods as dollars as forex shortages emerged. Many banks stopped issuing letters of credit as they could not settle them on time.
“Many companies resorted to usance bills and suppliers credit to clear goods,” a financial sector source said.
“They had priced goods at dollar rates ranging from 230 to 260 to the US dollar. But the rupee is weaker and they will book a bigger loss. Now there are some dollars available to pay but at higher prices.”
But exporters who have given credit to buyers stand to gain, at least in rupees.
Sri Lanka has had currency troubles ever since a money-printing central bank was set up in 1950 abolishing a currency board that had kept the country safe during two World Wars and the Great Depression.
The central bank blew up 11 months of reserves collected over 85 years of the currency board and started blaming budgets for external trouble.
Classical economists and analysts have called for an overhaul of the monetary law to tie the hands of activist monetary boards by law so that they cannot engage in Keynesian stimulus with a peg and blow the balance of payments apart and credit economic instability and social unrest. (Colombo/Mar16/2022)

[/size]
Leave a Comment
[size]
Your email address will not be published. Required fields are marked *

Comment
Name *
Email *
Save my name, email, and website in this browser for the next time I comment.






MOST VIEWED
HEALTH
Sri Lanka firms with billions in trade credits exposed as rupee falls Sinopharm_COVID-19_vaccine_2021_K-e1617008045646
Rapid drop in COVID-19 cases in Sri Lanka, but officials caution against complacency
2 mins read

ENERGY
Sri Lanka firms with billions in trade credits exposed as rupee falls Lioc_sm
Lanka IOC raises fuel prices to record high
2 mins read

BUSINESS
Sri Lanka firms with billions in trade credits exposed as rupee falls Petrolshedsm
Sri Lankan transport service providers struggle after sharp fuel price hikes
2 mins read

ECONOMY
Sri Lanka firms with billions in trade credits exposed as rupee falls W-A-Wijewardene-lg
Sri Lanka has to raise policy rates to contain inflation, help rupee: Wijewardena
2 mins read

ECONOMY
Sri Lanka firms with billions in trade credits exposed as rupee falls Gazette-export-M22
Sri Lanka allows exporters to pay local suppliers in dollars
2 mins read


Sri Lanka firms with billions in trade credits exposed as rupee falls Lineandarrow

[/size]

Back to top  Message [Page 1 of 1]

Permissions in this forum:
You cannot reply to topics in this forum