COLOMBO: The local tea industry will have to wait further to reap the benefits originating from Iranian banks reconnecting to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) as Sri Lanka’s monetary watchdog is yet to act on it.
According to the country’s Tea Exporters Association (TEA) chief, the Central Bank of Sri Lanka has been requested to expedite the process, so that the industry can capitalize on the development.
“Though the reconnection has taken place, not much has happened from our side as yet. Our banks must establish contact with the approved Iranian banks, and pave the way for transactions to take place.
“They are still waiting for an official directive, but we, as the industry is unsure who is supposed to issue the same,” said TEA Chairman Rohan Fernando.
The tea exporters have collectively written to the Central Bank Governor Arjuna Mahendran requesting for a meeting to gain clarity on the situation, and to discuss measures that could be taken going forward. An acknowledgement for the same is yet to be received.
The SWIFT became off limits to Iranian banks after the implementation of US-led economic sanctions on the country in 2012. This resulted in about 30 Iranian banks being cut off from using the international service.
Following the lifting of sanctions this year, the Central Bank of Iran (CBI) last week announced that nine banks had been given the green light to join the international network.
Reconnected to the SWIFT as of Monday (1 February) were: Bank Melli Iran, Tejarat Bank, Bank Mellat, Bank of Industry and Mine, Post Bank of Iran, Bank Sepah, Export Development Bank, Refah Kargaran Bank and the CBI itself.
Furthermore, several Iranian private banks including Dey, Saman, Pasargad, and Parsian in addition to two state-run banks, Maskan and Keshavarzi, were said to have already been reconnected to the SWIFT.
Despite the move towards removing the sanctions, the freezing of Iranian assets by the US, which impacted the cash flows of Sri Lankan tea exporters, is yet to be resolved.
“Once normalcy is established then our businesses should get a boost,” said Fernando.
Reflecting similar sentiments, Imperial Teas Group Chairman and Managing Director Jayantha Karunaratne said exporters were hopeful that the opening up of Iran would allow the local industry to enjoy a plethora of benefits once its banks were able to resume all functions through SWIFT.
“We are likely to see a number of positives and one is in the area of prices. Once opened, we will likely to see improved prices at the Colombo tea auction as higher demand is expected,” said Karunaratne.
While Iranian banks getting connected is an important first step, a top industry representative who wished to remain anonymous pointed out that Iranian traders waiting for their currency to appreciate was an underlying issue.
The Iranian traders adopting a wait-and-see approach have led to the delaying of payments and new purchases.
The negative implications of the transition phase Iran is experiencing are already being felt in the local market with a number of tea categories showing a value decline.
The local tea industry is of the view that while the scenario seems rather positive, it will take longer than expected to witness a turnaround.
Meanwhile, industry representatives stressed that Sri Lanka would have lot more work to do to uphold its share and value proposition as the proposed liberalization of the tea sector will fuel increased competition.
