Export proceeds repatriation rule takes hold as November figures double

• Cabraal reassures markets of meeting all debt obligations as and when they fall due
• Confident of ending year with minimum of US$ 3.0bn in reserves 
• Contemplating on drawing down the Chinese swap of US$ 1.5bn equivalent 
• Says US$ 400 mn swap being negotiated with India could be here any time 

The revised export proceeds repatriation and conversion rule that came into effect end of October appears to be bringing the desired outcomes as Central Bank is seeing the reparations of dollars from exports having doubled during November. 

The Central Bank on October 28 in a fresh circular revised the hitherto prevailed export proceeds repatriation rules offering more leeway for exporters to meet their expenses and commitments in foreign currency before requiring to convert them into rupees on or before the seventh day of the following month from the receipts of such incomes. 
What made the new rules further distinct from the several times tweaked earlier rule was taking the services sector exports also under the remit of the repatriation requirements. 

Central Bank Governor Ajith Nivard Cabraal in a television interview earlier this week said, since the revised instructions were issued, exporter dollar repatriations doubled from around US$ 500 million a month through October to over US$ 1,100 million in November. 

Sri Lanka is facing an acute Balance of Payment (BoP) trouble this year with the deficit touching a fresh high in the ten months thus far this year, Mirror Business showed in a separate report. 

Making the matters worse are the upcoming foreign debt repayments to the tune of US$ 6.9 billion next year compared to the country’s November-end reserves of US$ 1.6 billion. 

But Cabraal shrugged off such concerns and reassured the markets saying that all debt would be honoured and the country would end the year with a minimum of US$ 3.0 billion in foreign exchange reserves. 

Without providing a time frame, he said the US$ 400 million swap facility being negotiated with India is currently at advanced stages and could materialise any moment. 

But, he didn’t specify whether the year-end reserves would include this US$ 400 million swap or the Yuan swap facility the Central Bank already has with China since March this year worth dollar equivalent of US$ 1.5 billion. 
However, he was quoted by Bloomberg Newswire few days ago as saying that Sri Lanka might draw the facility down and it is, “under contemplation”. 

Cabraal as a career accountant looks at the country’s foreign debt from the standpoint of cash flows, instead of the reserve position at a given time as he believes what matters is whether the country generates cash inflows sufficient enough to settle its foreign currency denominated debt.

Unperturbed by the rating downgrade by Fitch Ratings last week, Cabraal said similar parties had been predicting doom and default since the beginning of 2020, but they had repeatedly been proven wrong by timely settlement of foreign debt as and when they fell due, and said they would continue to be proven wrong in 2022 too. 

He also said as part of their strategy to meet foreign debt obligations, they have also identified a section of debt which can and will be rolled over as typically happens and hence they remain confident of sailing through the debt problem, which some sections portray as an apocalyptic scenario.