China has blacklisted a top state-owned bank in Sri Lanka, citing a “vicious” Letter of Credit “default” in relation to a recent order for organic fertilizer placed by Colombo with a Chinese company. Last week Sri Lankan authorities rejected the consignment that they found to be contaminated.
China’s Ministry of Commerce said the “default” had caused “huge losses” to Chinese enterprises in international trade with Sri Lanka. Responding to a tweet from the Colombo-based Chinese Embassy on the decision, People’s Bank in Sri Lanka said it was only following a court order, restraining the bank from paying the Chinese company. “Once the legal barriers in effect are removed, the LC payment will be effected promptly as per the usual trade practices,” the bank said in a statement on Friday.
Last week, Sri Lanka barred a Chinese ship carrying organic fertilizer, after the National Plant Quarantine Service tested samples and confirmed presence of “organisms, including certain types of harmful bacteria”. A Commercial High Court banned any payment to Qingdao Seawin Biotech Group Co. Ltd. for the 96,000 tonnes of fertilizer, news agency AFP reported.
China’s subsequent blacklisting of the Sri Lankan bank, and the public clash between officials on both sides, come as concerns of an acute agriculture crisis grow in the island nation, following Colombo’s decision to abruptly switch from chemical to organic fertilizers in May this year.
Critics have slammed President Gotabaya Rajapaksa’s move as “ill-timed” during the pandemic and “ill-advised”, due to its likely adverse impact on food production. The decision has also triggered farmers’ struggles that are fast spreading, even as Colombo tries sourcing organic fertilizer from other countries.
Meanwhile, the Chinese Embassy in Colombo, on its Twitter page, sought to give a “timeline” of events, and said Seawin [Chinese company Qingdao Seawin Biotech Group] had won an open bid, signed contracts, passed tests of China and an international agency designated by Ceylon Fertilizer Company, and shipped the consignment ahead of schedule. Sri Lankan authorities “disagreed in halfway”, called the consignment “toxic/harmful”, the Embassy’s tweet said, adding: “Ship refused. Third party test refused. L/C payment obligation refused. PBSL blacklisted,” omitting the October 22 court order.
Prime Minister Mahinda Rajapaksa on Thursday told the Chinese Ambassador, who met him at his official residence, that the government cannot accept the “tainted” fertilizer stock but is willing to purchase fertilizers that meet Sri Lanka’s “expected standards”, the State-run Daily News reported on Friday.