CBSL issues clarification to clear up confusion over forced foreign currency conversion

Central Bank statement

Recent rules issued by the Central Bank of Sri Lanka (CBSL) regarding the repatriation and conversion of export earnings into Sri Lankan Rupees (LKR) have been misinterpreted by some parties with special interests.

In particular, unfounded speculation has been maliciously spread that CBSL rules require the forced conversion of all workers’ remittances to LKR upon receipt of such foreign currency funds by licensed banks. The rules on converting export earnings do NOT apply to workers’ remittances.

Migrant workers who channel their income through licensed banks and other formal channels can hold these foreign currency funds at any commercial bank. As a result,

Sri Lankans working overseas are NOT required to convert their remittances to LKR. However, those who wish to convert this income into LKR would be eligible to do so while those who do so under the “Incentive scheme on inbound worker remittances” announced by CBSL, would receive an additional incentive of Rs. 10.00 per US dollar until January 31, 2022.

The products of “service exports” are the foreign exchange earnings of resident Sri Lankans who provide tourist, professional, etc. services. to non-residents.

These exports of services would be subject to the rules for converting the residual export product after adjustment of the allowable deductions. In this context, it would be clear that the recent rules on repatriation and conversion of export earnings into LKR only apply to “exporters of goods and services” from Sri Lanka, and that the new rules require exporters to convert only export earnings balances into LKR after deduction of authorized payments specified in the rules.

In fact, these authorized payments cover remittances relating to current transactions, authorized foreign currency withdrawal, debt service charges, purchases of goods and services, and investments in Sri Lanka Development Bonds ( SLDB).

It should also be noted that similar repatriation and conversion rules for service export earnings are also applicable in other countries in the region, including India, Bangladesh, Pakistan and Thailand.

The CBSL reiterates that it will continue to facilitate the improvement of workers’ remittances in collaboration with the government by incentivizing funds disbursed through formal channels, as previously announced, while bringing severe legal proceedings against all persons (those who send and receive) who engage in illegal fund transfers. Accordingly, the general public is urged to remain vigilant and not to be misled by false information and promises.

Authorized Banks are also advised to strictly comply with the rules stipulated by the CBSL with regard to the conversion of clients’ foreign exchange products, and to inform their clients of these rules, in order to avoid any misunderstanding.

For more details:

– Conversion of Export Products according to the Extraordinary Gazette n ° 2251/42

(https://www.dfe.lk/web/images/rdevelopment/035fa8af3491e2f41c9e9756e69f2754-2251-42-E.pdf)

– Frequently asked questions

(https://www.dfe.lk/web/images/downloads/other/Rules_No.5%20-FAQs.pdf)

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