25 February 2021 09:21 am
After the exporters were asked to convert 25 percent of their dollar proceeds into rupees immediately after receiving them, the licensed banks are required to sell 50 percent of those foreign currency proceeds back to the Central Bank.
The latest measure was among a string of measures introduced by the Central Bank to rebuild the foreign currency reserves from non-borrowed sources, after seeing some depletion, due to the challenges posed by the pandemic.
“Along with the ongoing active efforts and fiscal and monetary policy support to promote foreign exchange earning sectors of the country, such absorption of foreign exchange by the Central Bank would help the country to rely on its own resources, instead of foreign borrowing, while strengthening Sri Lanka’s credit profile, enhancing exchange rate stability and improving the resilience of the economy,” the Central Bank said in
a statement. Sri Lanka’s foreign currency reserves fell to US $ 4.8 billion by end-January 2021, from US $ 5.7 billion in December 2020 and US $ 7.6 billion in 2019, as the pandemic took a heavy toll on exports and other financial inflows while decimating the tourism industry, which generates about US $ 4.5 billion for a year.
But a few exporters balked at the idea, claiming that they were neither consulted nor informed prior to the decision by the Central Bank.
They lamented that the rule was unfair, could hurt the government’s export income target of US $ 13 billion for 2021 and would give incentive to resort to evade repatriating foreign exchange.
However, they enjoy priority treatment by the government since the virus broke out in March last year and continue to do so while also being awarded with the most generous tax cuts in any time in the history of the country for exporters.
Last week, the Central Bank ordered the exporters to bring back their proceeds within 180 days since the date of the shipment and to covert 25 percent immediately of such proceeds upon their receipt. But a few exporters balked at the idea, claiming that they were neither consulted nor informed prior to the decision by the Central Bank.
They lamented that the rule was unfair, could hurt the government’s export income target of US $ 13 billion for 2021 and would give incentive to resort to evade repatriating foreign exchange.
However, they enjoy priority treatment by the government since the virus broke out in March last year and continue to do so while also being awarded with the most generous tax cuts in any time in the history of the country for exporters.