CBSL issues clarification to clear up confusion over forced foreign currency conversion

Central Bank Statement

Recent rules issued by the Central Bank of Sri Lanka (CBSL) regarding the repatriation and conversion of export earnings into Sri Lankan Rupees (LKR) have been misinterpreted by some parties with vested interests.

In particular, unfounded speculation has been maliciously spread that CBSL rules require the forced conversion of all workers’ remittances into LKR upon receipt of such foreign currency remittances by licensed banks. The rules on the conversion of export earnings DO NOT apply to workers’ remittances.

Migrant workers who channel their earnings through licensed banks and other formal channels can hold these funds in foreign currency at any commercial bank. As a result,

it is NOT mandatory for Sri Lankans working abroad to convert their remittances into LKR. However, those who wish to convert such earnings into LKR would be eligible to do so while those who do so under the “Worker Inward Remittances Incentive Scheme” announced by the CBSL, would receive an additional incentive of Rs 10.00 per US dollar until January 31, 2022.

Earnings from “service exports” are the foreign exchange earnings of Sri Lankan residents who provide tourism, business, etc. services. to non-residents.

These service exports would be subject to the rules for converting the residual product of exports after adjusting the authorized deductions. In this context, it would be clear that the recent rules regarding the repatriation and conversion of export earnings into LKR apply only to “exporters of goods and services” from Sri Lanka, and that the new rules oblige exporters to convert only the residual proceeds balance of export earnings to LKR after deduction of authorized payments specified in the rules.

In fact, these authorized payments cover outward remittances for current transactions, authorized currency withdrawals, debt service charges, purchases of goods and services, and investments in development bonds. of Sri Lanka (SLDB).

It should also be clarified that similar repatriation and conversion rules for service export earnings are also applicable in other countries in the region, including India, Bangladesh, Pakistan and Thailand.

The CBSL reiterates that it will continue to facilitate the improvement of workers’ remittances in collaboration with the government by encouraging remittances transferred through official channels, as previously announced, while taking strong legal action against all persons (those who send and receive) who engage in illegal activities. fund transfers. Accordingly, the general public is urged to remain vigilant and not to be misled by false information and promises.

Licensed banks are also advised to strictly adhere to the rules stipulated by the CBSL regarding the conversion of customers’ foreign exchange products and to inform their customers of these rules in order to avoid any misunderstanding.

For more details:

– Conversion of export proceeds in accordance with Extraordinary Official Gazette No. 2251/42

(https://www.dfe.lk/web/images/rdevelopment/035fa8af3491e2f41c9e9756e69f2754-2251-42-E.pdf)

– Frequently Asked Questions

(https://www.dfe.lk/web/images/downloads/other/Rules_No.5%20-FAQs.pdf)

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