CB strengthens foreign remittances mobilisation
View(s):The Foreign Remittances Facilitation Department (FRFD) was set up by the Central Bank (CB) earlier this month to monitor and centralise inward remittances, but the question remains whether this objective will be realised soon enough.
The regulator in a statement said that CB established this department to facilitate and streamline workers’ remittances inflows to the country, under the provisions of the Monetary Law Act.
However, analysts are quick to point out that the prevailing exchange rate of Rs. 203 to a US dollar is not helping to attract workers’ remittances. The workers will opt for ways to get a better rate for their dollars, they said. “Evidence from other countries has shown that when no other option has been left, people may move into informal financial systems,” an analyst said. Undiyal and Hawala systems will be driving further demand, he pointed out.
Currently, the real-time value of the dollar is as much as Rs. 300. Analysts point out that the black economy is thriving and there are dollars to exchange at Rs. 240. “This is the lowest exchange rate and depending on the day it will go up to Rs. 300,” a moneychanger told the Business Times. He added there are enough people to buy dollars at this rate. Especially now the country is opening and with the shortage of dollars, those who wanted to travel overseas are scrambling to get dollars, he said.
In this situation, an economist noted the balance of payment in the country will show a negative figure, but the underground economy will keep on thriving. “This will create even bigger inflation in the months to come.”
CB officials said that they are confident some substantial credit lines will come to Sri Lanka by Christmas and early next year.
The only way out of this quagmire is to devalue the Sri Lankan rupee and redirect the inward remittances by the foreign exchange-earners, economists say.