In response to the escalating Red Sea crisis, an inter-ministerial meeting convened on Wednesday to strategize and address the challenges faced by exporters. The meeting, attended by key ministries such as commerce, shipping, defense, and external affairs, focused on mitigating the impact on trade and ensuring the smooth flow of credit to exporters.
During the session, the Department of Financial Services (DFS) within the finance ministry was tasked with closely monitoring the credit requirements of exporters. The directive emphasized the importance of maintaining a steady flow of credit to support export activities. Additionally, the DFS was instructed to keep a vigilant eye on insurance costs associated with shipping, a critical aspect considering the current crisis in the Red Sea region.
An official reported that the meeting outcome included instructions to ease bank credit and closely monitor shipping volumes, which, at present, have not experienced a decline from major ports. The shipping ministry has been assigned the responsibility of monitoring and ensuring the stability of trade volumes amid the crisis.
The defence ministry, actively involved in discussions, informed the gathering about enhanced surveillance measures in the Arabian Sea, with additional mechanisms implemented to facilitate the smooth movement of maritime traffic. Given the gravity of the situation, the ministry of external affairs is engaged in diplomatic negotiations with affected countries to seek a credible solution.
While the crisis has led to increased shipping costs on specific routes by up to six times, exporters are concerned about potential future impacts if the situation persists. The government is exploring alternative routes to address these challenges.
Notably, shipping lines, including Maersk, have halted services, resulting in heightened costs and longer turnaround times for shipments. However, the impact has been limited to time and cost considerations so far, with no major disruptions reported in trade volumes.
To alleviate concerns, the Ministry of Commerce has engaged with the Export Credit Guarantee Corporation (ECGC), urging them not to raise premiums on credit insurance and related services. This move aims to enable banks to continue providing timely and adequate credit facilities to exporters.
In light of the ongoing conflict since mid-November, where Houthi rebels in Yemen target commercial ships in solidarity with Gaza and protest against Israel's regional activities, the crisis has resulted in a significant increase in shipping costs, insurance premiums, and delays in shipping routes. A strategic group within the commerce ministry has been established to closely monitor the situation, ensuring a coordinated response to the evolving crisis in the Red Sea region.