Cash liquidity crisis

[TamilNet, Sunday, 28 June 1998, 23:59 GMT]
A severe shortage of cash in banks of the Mullaitheevu district is reported to have caused a series of problems, affecting activities such as the supplying of relief food, the payment of salaries and pensions and the local purchase of paddy by the Multipurpose Co- operative Societies (MPCS) there.

The cash shortage is hampering the purchase of paddy from farmers, and this in turn means that there isn't enough stock for the MPCS to sell on to families in the district.

Meanwhile private traders have been using the opportunity created by the lack of cash to buy paddy at a cheaper price, with many farmers making a loss as a result.

While the MPCS would have been prepared to pay Rs 10 for a kilo of paddy the private traders are paying only Rs 7, which is less than the cost of production. The desperate farmers, however, have no choice but to sell the paddy at this low price, as they need cash for their daily purchases.

Furthermore, programmes such as the distribution of food stamps for the very poor and the drought relief scheme, implemented by the World Food Programme, have had to be suspended as a consequence of cash shortage.

People who had been displaced prior to Operation Jeyasikurui, numbering 71 456 (belonging to 17 997 families), received only half rations last month, sufficient for just 10 days.

The bank managers have said that they are unable to transport cash to Mullaitheevu as there have been difficulties regarding insurance cover and security clearance, which has to be obtained from the Ministry of Defence.

The MPCS has now requested for permission to transport cash from Vavuniya to purchase paddy. However a decision is yet to be taken on the request.

The local heads of Sri Lankan Government Departments are allowed cash from Vavuniya to pay salaries. However, few departments have made use of this facility because of transport difficulties.

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