Export proceeds repatriation to increase foreign exchange circulation in local banks
Amidst protests from exporters, the Government has enforced ‘export proceeds repatriation ‘requirement to prevent the stashing away of foreign exchange at the cost of the national economy, a senior state official said. He noted that the Finance Ministry has taken this decision following discussions with leading exporters and some of them have agreed to bring back money voluntarily. The Central Bank (CB) has now been vested with the task of implementing and monitoring the export proceeds repatriation. ”The decision by the government to re-institute repatriation requirements for export earnings is not a part of the authorities’ programme with the IMF, and the move was not a part of the discussions,” an IMF source in Washington said in response to a request for comments made by Business Times via e-mail.
However IMF ‘Article VIII Status’ is essentially, vis-a-vis, the ‘liberalisation’ of imports and exports, that too, subject to, quotas, restrictions and sanctions, imposed even by several countries with ‘free economies’, and such ‘status’ does not prevent countries from ‘monitoring and enforcing’ the correct repatriation of export proceeds. Defending the government’s move to repatriate all export proceeds to Sri Lanka, CB Deputy Governor Dr. Nandalal Weerasinghe says this Treasury directive is aimed at increasing the circulation of foreign exchange within the local banking system. The CB recently lifted the restrictions on taking out foreign currency from local bank foreign currency accounts for personal purposes, Dr. Weerasinghe said at a media conference held in Central Bank auditorium in Colombo recently.
Measures have been taken to relax foreign exchange regulations allowing NRFC (foreign currency) account holders to transfer accounts to any other bank, and increased the US$2,500 travel allowance cap to $5000 and permitted finance companies to accept foreign currency deposits.
Therefore it was not a question for exporters as to whether their export proceeds were in a foreign bank account or a local bank account as they can withdraw their money from the local bank account and take it out for their business purposes, he added. The exporters should not be unnecessary alarmed as their foreign exchange will not be converted to rupees, Dr. Weerasinghe disclosed.
However he noted that the Finance Ministry has taken a decision that export earnings should be brought into Sri Lanka within three months and if this is not followed it would be considered a breach of the Exchange Control Act. Holders of Foreign Exchange Earners Accounts (FEEA) are eligible to obtain foreign currency loans. Previously foreign currency loans could be obtained only by a limited category of foreign exchange earners, such as exporters and indirect exporters. The CB has now established a mechanism to grant permission on a case-by-case basis for the repatriation of dividends and sale or maturity proceeds of investments made by foreign investors in shares and business ventures in Sri Lanka.