Central Bank eyes exporters’ forex savings
Cash strapped for foreign exchange, Sri Lanka’s Central Bank (CB), during a meeting on Wednesday, turned to some of the nation’s key exporters for help as the compulsory 25 per cent conversion of exporter dollar hadn’t worked and as a result of which they are now hinting at further dipping into exporter savings.
The virtual hour-long meeting was held with the participation of the CB Governor Prof. W.D. Lakshman, Deputy Governor N.W.G.R.D. Nanayakkara and Monetary Board member Dr. Rani Jayamaha with about 20 top exporters.
One participant who attended the meeting, who like others didn’t want to be identified, told the Business Times that the CB had raised concern that they had not been able to generate the adequate amount of foreign reserves despite obtaining a 25 per cent conversion rate on all exporter foreign currency transactions.
At the meeting, the CB had asked the exporters how it was possible that had the exporters all provided the necessary 25 per cent conversion then they should have ideally accrued at least US$500 million in foreign exchange. However, this has not been possible, CB officials had explained.
One key sector official however, pointed out that their quarterly submissions to the Board of Investment (BOI) were a clear indication of the revenue they generate. “I don’t think they can blame exporters,” one exporter who participated at the meeting noted, adding, “They should check with the banks.”
Though they were not blaming the exporters, it was pointed out that the CB seemed confused why they were unable to accrue the expected amount through this conversion.
However, exporters had continuously pointed out that this could have been a result of something wrong with the banking system and not them as they were unable to find a reason for this situation to have arisen.
During the meeting exporters raised the issue that the 25 per cent conversion rate was only applicable to merchandise exporters and that the authorities should include the service exporters as well. “We justified that we will not be able to do more than 25 per cent,” one exporter pointed out.
Authorities have also requested that each exporter maintains a separate account specifically for export proceeds in a bid to ensure that their revenues could be monitored better.
This account is not to include those investments they have made or any loans obtained in order to ensure that everybody complies with all the rules like bringing down export proceeds within three months and applying the 25 per cent conversion rate within 30 days.
The CB also put forward a proposal on how best to tap the savings of the exporters, where exporters with savings in foreign currency accounts are likely to be asked to convert them fully or partially to rupee accounts. But this had not gone down well with the exporters who raised concerns in this regard. Exporters had argued that though they have foreign currency reserves and excess monies those are not static and were time and again used for their business operations.
On the other hand, exporters had stated that they were willing to allow the government to borrow from their savings through the CB in the form of bonds or any other financial instrument. It is also learnt that some exporters had already met with the authorities prior to this meeting since they were seen to have explained that they were willing to help the government by depositing some of their foreign currency overseas loans.
One of the participants told the Business Times, “we didn’t directly say it but in everyone’s mind it’s there that they will need to turn to lending institutions like the International Monetary Fund (IMF).”