The Central Bank last week said it found no backlash against the recent rule which required exporters to convert remaining proceeds after meeting their multiple requirements in foreign currency, as reported by certain media sparking some uproar and agitation.
The Central Bank on October 28 in a new rule relaxed the minimum mandatory conversation rate of 25 percent of export proceeds and instead provided the exporters with the opportunity to utilise their proceeds in meeting wide ranging requirements, including the commitments for the next month before converting any remaining into Sri Lankan rupees on or before the 7th day of the following month.
This created an immediate media uproar citing some anonymous sources claiming that the rule tantamount to sheer overregulation and would force exporters to under invoice and importers to over invoice.
But Central Bank Governor Ajith Nivard Cabraal responding tonsuch claims said that they have no basis, and no exporter expressed any dismay as there was nothing unfair in the rule.
“This morning I spoke with the Chamber of Commerce. Before that I have spoken with even the biggest apparel sector exporters. They have given an appropriate response to that matter,” Cabraal told the media at the monetary policy press conference held Thursday morning.
Cabraal said he held extensive discussions with the officials both inside and outside the Central Bank to understand if the rule in anyway treats the exporters unfairly.
“In no instance anyone could show a weakness or provide with a counter argument and all of them have admitted that this could be done,” he added.
On October 28, issuing an extraordinary gazette the Central Bank gave more leeway to exporters of both merchandise goods and services to meet their expenses utilising the exports proceeds for (a) outward remittances in respect of current transactions, (b) withdrawal of foreign currency notes as permitted, (c) debt servicing expenses and repayment of foreign currency loans, (d) purchase of goods and obtaining services including one-month commitments and (e) investing in Sri Lanka Development Bonds in foreign currency up to 10 percent of export proceeds, and the residual would only be required to convert into rupees.
Until then, out of the export proceeds received, exporters were required to convert 25 percent of such proceeds, with the exception to come down to 10 percent within the next 30 days.
Explaining that this conversion into rupees is very much part of the international trade cycle without which imports cannot happen as such converted rupees are then used to buy dollars when somebody imports something, Cabraal said adding that this couldn’t be any fairer.
In international trade, importers sell their local currency to buy dollars and the exporters receive dollars which they then convert in to their local currency without which the imports cannot be funded.
However, some exporters hoarded their proceeds in dollars in recent months hoping to make massive gains from the expected weakening of the rupee against the dollar. But the Central Bank held the official rupee/dollar rate at Rs.198/202 without budging.