Sanity dev throws Could not find source context error

[DmitriyTveryakov]

I have custom input in which i use const client = useClient({ apiVersion });

sanity dev gives an error Could not find source context error
When I start the built sanity, everything works find

It might have something to do with imports resolving since we are importing schemas from another npm library in our registery.
This library is transpiled into es5 with commonJS imports

package.json

"dependencies": {
    "@practical-js/sanity-hierarchical-docs": "^1.2.5",
    "@sanity/client": "^5.4.2",
    "@sanity/code-input": "^4.1.1",
    "@sanity/color-input": "^3.1.0",
    "@sanity/icons": "^2.4.1",
    "@sanity/scheduled-publishing": "^1.2.1",
    "@sanity/vision": "3.16.2",
    "cloudinary": "^1.33.0",
    "lodash": "^4.17.21",
    "prop-types": "^15.8.1",
    "react": "^18.2.0",
    "react-dnd": "^16.0.1",
    "react-dom": "^18.2.0",
    "react-tiny-popover": "^7.2.4",
    "sanity": "3.16.2",
    "sanity-plugin-cloudinary": "1.1.1",
    "sanity-plugin-markdown": "4.1.0",
    "styled-components": "^5.3.6"
  },
 "devDependencies": {
    "@sanity/cli": "^3.16.2",
    "@sanity/types": "^3.16.2",
    "@swc/cli": "^0.1.62",
    "@swc/core": "^1.3.62",
    "copyfiles": "2.4.1"
  }