- Money to be utilised to settle pharma suppliers’ bills
- 50% of overdue bills to be paid in next few days
By Shenal Fernando
The Ministry of Health has secured Rs. 33 billion to settle overdue bills to suppliers of medicine and pharmaceutical equipment, with 50% to be paid in the next few days.
Speaking to The Sunday Morning Business, Minister of Health Keheliya Rambukwella stated that the Ministry had secured Rs. 33 billion from the Treasury Secretary to settle overdue bill payments to pharmaceutical suppliers and claimed that they were ready to pay 50% of the overdue amount to the suppliers within the next few days.
“I have promised that we will match the US Dollar rate, as the pharmaceutical suppliers say that the US Dollar rate has risen significantly compared to the rate when the credit line was opened. This is a reasonable argument, because the US Dollar rate is usually fixed while bargaining during the procurement process. However, I said that it should go both ways. Therefore, if the US Dollar drops in the future, then at that point they must also agree to lower their prices, and the suppliers have agreed to do so,” he stated.
Prime Minister Ranil Wickremesinghe addressing the nation on 16 May stated that the State Pharmaceuticals Corporation (SPC) had not paid medicine suppliers in over four months and as a result, several international companies were taking steps to blacklist the SPC.
The Prime Minister stated: “We have not made payments to the suppliers of medicines, equipment, and food for patients. We have to pay them Rs. 34 billion.”
A source from the local pharmaceutical industry disclosed to The Sunday Morning Business that the industry, including importers and local manufacturers, had not been paid in some six or seven months.
“This is a terrible time for the country and the pharmaceutical industry is trying to do its level best. It is a very stressful time, where we are struggling to open our required Letters of Credit (LCs). Despite this, when it comes to hospital supplies, we have continued to supply regardless of overdue payments. However, because interest rates are now around 24% and the rates we quoted were based on the exchange rate before the float, the industry is facing difficulties,” the source stated.
The source further explained that the pharmaceutical industry had been suffering significant losses due to the exchange rate loss incurred in settling credit lines as well as increased financing costs to cover payment delays on the part of the Government.
“There are two main impacts on the pharmaceutical industry. Firstly, we usually get goods on credit from our suppliers for about a four-month period and we supply the goods to the SPC or to a hospital. However, the exchange rate suddenly collapsed by around 80% within a short period. Therefore, when we settled with the supplier, we had to pay at a higher rate than what we quoted.
“Secondly, when SPC delays its payments for more than six or seven months, most companies are forced to run on overdraft. Recently the interest rate has surged to around 24% from around 6-7% four months ago. Therefore, many players in the industry are suffering significant losses,” the source noted.
Sufficient funds available for pharma imports until June 2023: Health Min.
Minister of Health Keheliya Rambukwella disclosed to The Sunday Morning Business that he had secured $ 400 million worth of funds, which would be sufficient to meet Sri Lanka’s pharmaceutical needs until June 2023.
However, he admitted concerns remained with regard to meeting the pharmaceutical demand for the next two months, claiming that pharmaceutical manufacturers did not have stocks and would need at least three months to supply following the confirmation of orders.
“I’m currently looking to bridge the gap during the next two months and I’m considering approaching the open market and buying the necessary stocks for these two months,” he said.
Regarding the $ 400 million secured, the Minister stated: “We have a $ 200 million Indian credit line under which we have already opened Letters of Credit for $ 92 million. Over 70% of the drugs used in Sri Lanka are imported from India. There is also a $ 28 million grant from the Chinese Government for Chinese medicine, $ 67 million from the Asian Development Bank, and $ 150 million from the World Bank.”
He further stated that Sri Lanka had received several small parcel pharmaceutical donations such as the recent $ 2.8 million donations of anaesthesia from the French Government, which ensured sufficient supplies of anaesthesia in the country for the next 90 days.