Nivard sticks to his guns on a faster return of exporters’ profits

  • CBSL requires mandatory repatriation and conversion of new export commodities into rupees after deducting allowable amounts of forex for intermediate and investment inputs
  • Export products already accumulated in foreign exchange deposits with banks from 2020 must be converted proportionally within 6 months
  • CBSL to introduce non-interest bearing foreign currency accounts for export earnings to encourage conversions
  • International Transaction Reporting System from January 1, 2022 to monitor foreign currency inflows and outflows from the banking sector
  • 3 major private sector lobby groups challenge CBSL claims that exporters rack up nearly $ 3 billion in overseas revenue
  • Cabraal says the current Rs. The 199-203 band for foreign exchange transactions in the United States still provides a Rs. 32 per dollar advantage over a real effective exchange rate assessed using the implicit exchange rate of 24 competing countries

Governor of the CB Nivard Cabraal – Peak Lasantha Kumara


Despite criticism, concerns and questions over its hoarding findings, the central bank is moving forward with more stringent measures to ensure the swift repatriation of export earnings, including by those who export services.

Recent CBSL revelations that nearly $ 3 billion in export earnings in the first eight months of 2021 were racked up overseas by exporters without repatriation have sparked widespread rebuttal by major lobbyists. export sector, including the Joint Apparel Association Forum (JAAF), the Ceylon Chamber of the Association of Sri Lankan Trade-Related Exporters (EASL) and the Sri Lankan Association of Rubber Manufacturers and Exporters ( SLAMERP).

They also questioned the accuracy and credibility of CBSL’s claim, thus generalizing that the monetary authority was disrespectful of unscrupulous sectors and exporters. The Daily FT learns that several international banks abroad have raised new concerns as the CBSL press release confirmed a new dimension to the currency crisis in Sri Lanka.

However, when unveiling CBSL’s short-term roadmap, Governor Nivard Cabraal responded to some of the criticism. He justified the hoarding statement by saying that CBSL had enough data. “If the income is repatriated, then fine, there is absolutely no problem. We (CBSL and the exporters) are on the same page, ”Cabraal said, adding that the concern was with those who had not. “An export only becomes an export when the product is made in the form of converted rupees in Sri Lanka,” he added.

It was revealed that CBSL has obtained technical expertise from several countries to understand how they ensure the timely repatriation of export earnings. This was in response to the rebuttal by export lobbies of some of the Asian examples cited by CBSL. He also acknowledged that some exporters need imported inputs and that new rules will facilitate the same.

At present, there are no requirements for the repatriation of “export products” in trade in services, which will also be subject to new rules.

To ensure the repatriation of export earnings on time, CBSL via its short-term roadmap has put in place specific measures.

Exporters will need to convert repatriated export earnings into LKR after deducting allowable amounts of forex for intermediate and investment inputs.

Exporters are also required to convert export products already accumulated into foreign exchange deposits with banks from 2020 in accordance with the instructions of the Central Bank. For this, CBSL exporters must proportionally convert balances accumulated within six months. In addition, the introduction of foreign currency accounts not bearing interest on export earnings will encourage conversions.

Service exporters, including the IT / BPO industry, should provide repatriation and conversion of revenue and adhere to systems that monitor service-related currency flows.

Cabraal said CBSL has already launched the implementation of an International Transaction Reporting System (ITRS) to track foreign currency inflows and outflows from the banking sector as of January 1, 2022. The ITRS system would track performance of different export-oriented sectors, their repatriation of funds and reconversions. It would provide better data that would allow informed decision making related to the external sector.

He also claimed that the band within which (Rs. 199 to Rs. 203) the US dollar exchange rate was to be negotiated until December 2021 was competitive for exporters. To support his position, Cabraal said: “A spread of approximately Rs. 32 per US dollar exists between the current exchange rate and the Real Effective Exchange Rate (REER) of Rs. 167.75 depending on the implied exchange rate. from 24 competing countries.

In his remarks during the unveiling of the short-term roadmap, Cabraal recalled that a large gap existed between the flow of goods and the financial flow of exports. Due to undue speculation on exchange rate fluctuations, there had been reluctance to convert export earnings, thus limiting entry into the domestic foreign exchange market. He argued that inadequate repatriation / conversion of revenues by exporters taking advantage of interest rate arbitrage had hampered government efforts to support the economy and the export sector itself. (For the original CBSL statement, see https://www.ft.lk/top-story/Exporters-hoarding-2-76-b-in-earnings-overseas-CB/26-723545).

In this context, it was necessary to ensure that the currencies generated by the export activities were duly repatriated to the country and converted into Sri Lankan rupees.

To learn more about the private sector response, access these links. https://www.ft.lk/front-page/Apparel-industry-refutes-CBSL-allegations-of-hoarding-foreign-currency-earnings/44-723710

https://www.ft.lk/front-page/Exporters-Association-perturbed-by-CBSL-allegations-of-hoarding-foreign-currency/44-723708

https://www.ft.lk/front-page/Rubber-product-exporters-express-concern-over-CBSL-allegation-on-rapatriation-of-earnings/44-723648

Reaffirming its resilience, the export sector achieved the fourth consecutive month of more than $ 1 billion performance in September. Export earnings in the first nine months increased 19% to $ 8.8 billion. Exports of services rose 33% to $ 2.18 billion in the first eight months.

Officials said they were confident that exports in the remaining three months of 2021 would be well over $ 1 billion, and if so, Sri Lanka would have met the target of $ 12 billion for foreigners. exports this year. With exports of services, the target for total exports is $ 16 billion.

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