CB considers increasing dollar conversation limit from export earnings

The Central Bank is considering increasing the 25 percent dollar conversation limit imposed on exporters following a decision of the Cabinet of Ministers recently.

It has already issued directive to convert dollar earnings to rupees within 180 days, sell 25 percent to local banks and surrender half (12.5 percent) to the Central Bank.

These regulations will be revised in accordance with the Cabinet decision on increasing the 25 percent limit “to a higher level” after a study, Deputy Governor Dhammika Nanayakkara said at an online media briefing on Thursday.

The aim is to prevent the current practice of exporters holding onto dollar balances expecting a rupee fluctuation, he explained.

The exchange rate has recorded a depreciation of 6.7 percent against the US dollar thus far during the year, CB data showed.

As of end June 2021, the gross official reserves were estimated at US dollars 4.0 billion excluding the bilateral currency swap facility with the People’s Bank of China of US$.5 billion.

“Although the level of foreign reserves could experience some variations in the period ahead, such developments are expected to be temporary, with the adequate financing strategies lined up to maintain reserves at sufficient levels and to meet all maturing debt servicing obligations of the government on time,” the Central Bank said. (BS)