Central Bank further tweaks export proceed conversion rule

• Now wants only 10% of export proceeds to be converted to rupees, down from 25%
• Gives 30-day period for exporters and banks to convert repatriated proceeds, up from 14 days

In a fresh gazette last Friday (9th), the Central Bank (CB) relaxed the earlier rule of requiring exporters to convert 25 percent of repatriated proceeds down to 10 percent, while also doubling the period given to exporters and banks to meet the directive.

The CB in mid-February ordered exporters to repatriate their entire export proceeds within 180 days from the date of shipment and convert 25 percent of such dollars immediately, as a part of its strategy to strengthen the county’s foreign exchange reserves through non-debt creating foreign exchange inflows.  However, on March 9, the CB issuing another gazette notification allowed a 14-day period for exporters and banks to convert 25 percent of repatriated export proceeds, after considering the practical issues faced by the banking sector in converting export proceeds into rupees immediately.

A large number of exporters from apparel to gem & jewellery to tea opposed the 25 percent export proceed conversion rule, cautioning adverse impact of the country’s future exports.

After several rounds of discussions with the exporters, the CB has decided to relax the rule.

“Every exporter of goods shall, within thirty (30) days upon the receipt of such export proceeds into Sri Lanka as required under Rule 3 above, convert ten percent (10%) from and out of the total of the said exports proceeds received in Sri Lanka into Sri Lanka Rupees, through a licensed bank. 

Provided, however, that such date of conversion, shall not be a date later than the date before which the export proceeds shall be received in Sri Lanka as required by Rule 3 (i) above (i. e., not later than One Hundred and Eighty (180) days from the date of shipment),” the latest gazette notification stated.

Earlier the CB was targeting to purchase US$ 1.2 billion worth of foreign exchange from export proceeds, amounting to 12.5 percent of export inflows this year, ahead of external debt servicing obligations.

The CB also recently entered into a US$ 1.5 billion currency swap agreement with People’s Bank of China.(NF)