CB highlights disparity between dollar conversions and repatriation data

Days after Central Bank Governor Dr. Nandalal Weerasinghe alleged that what the exporters convert into rupees doesn’t add up with what they claim their value addition is, the Central Bank disclosed the most recent data to show the disparity. 

According to the data shared with the media last week, in October, the exporters of both goods and services repatriated proceeds worth US $ 1,450 million but what has been converted into rupee stood at only US $ 326 million, working out to a conversion rate of just under 23 percent. 

Providing a breakdown of the October proceeds, Deputy Governor Yvette Fernando said US $ 1,199 million had come from goods exports while the balance US $ 251 million had come from the services exports. 

What was converted out of the services export proceeds weren’t available at the time or were unable to track.  

Merchandise and services exporters in Sri Lanka are mandatorily required to repatriate all their export proceeds within 180 days of the date of shipment or provisioning of service and are mandated to convert their residual proceeds after meeting several payments required to be made from foreign currency on or before the seventh day of the following month. 

The banks are then required to sell down 25 percent of such foreign currency collected to the Central Bank, a requirement that was relaxed from 50 percent in effect till mid-April.  

However, the critics argue that such requirements could leave less foreign currency liquidity in the banking system, which could then be used to finance imports and would deter exporters and other service providers from repatriating their earnings completely, making the measures by the Central Bank counterproductive.

However, the Central Bank defended the continuation of the rule, as the converted dollars were used to purchase essential imports and end months-long queues for fuel, cooking gas, etc.

Dr. Weerasinghe last week brought open the issue of dollar conversions, which are far below the value addition claimed by the exporters.

Speaking at the Sri Lanka Apparel Exporters’ Association Annual General Meeting held last week, he said the apparel sector dollar conversions stand woefully low, at 14 percent, despite their claims of a 55 percent value addition. 

He also expressed his disappointment about the lack of clear response received from some exporters to a survey questionnaire, which was intended at determining how much is converted, as there is widespread perception that the exporters do not convert their dollars. 

He said this was an opportunity for exporters to come clean from such allegations and state clearly for what they spend their dollar incomes, such as for loan servicing, fuel or other raw material imports, as continuous failure to do so would result in naming and shaming those who do not respond.

The Central Bank launched a monitoring system to ascertain the level of dollar conversions in the export sector in July.