Central Bank to withdraw the foreign exchange surrender rule next week

Central Bank (CB) will end the foreign exchange surrender rule by next week as the banking sector is now processing sufficient dollar reserves to finance the essential imports such as fuel, cooking gas, medicines and other commodities, Central Bank Governor Nandalal Weerasinghe disclosed.    

The 15 per cent surrender rule imposed on banks for their dollar inflows will also lifted from next week, he said adding that the removing of surrender requirement will pave the way for rupee to trade freely

Addressing the Central Bank monetary policy review media briefing on Friday, he pointed out that the CB will intervene as and when necessary to provide assistance if there is any scarcity of forex for essential commodity exports.

The Central Bank continues the practice of collecting every month up to US$ 300 million from exporter dollar conversions and surrender requirements, which helps significantly to provide dollars to finance the essential imports.

It will buy dollars to build reserves as and when necessary, Governor Weerasinghe said expressing the hope that market rates will come down soon and the gap between policy rates and the market will also be narrowed.

He expressed the belief that the International Monetary Fund (IMF) programme will be approved by the executive board this month unlocking the US$ 2.9 billion bailout loan as they have now completed all the required prior fiscal and monetary actions.

He also said the $ 200 million obtained from Bangladesh will be settled in September 2023 and "All other repayment plans will be unveiled when the IMF programme is enforced.

The Central Bank has announced new concessionary measures on the debt of micro, small and medium enterprises (MSMEs) and individuals including fixed income earners and pensioners affected by the present macroeconomic conditions.

Noting that the continuation of these adversities would pose a severe threat on banks recoverability of outstanding loans and advances, Governor Weerasinghe noted that all banks have been asked to restructure and reschedule credit facilities of performing and non-performing borrowers.

Banks have also been requested to suspend recovery actions against non-performing credit facilities that have been classified as non-performing on or after 01.01.2020 on a case by case basis.