Fair Play & Change: Warning from CBSL

Statement from the Central Bank of Sri Lanka

Importance of “fair play” by all players in the economy to counter the current unprecedented economic crisis.

The government and the Central Bank of Sri Lanka (CBSL) have implemented several measures to ease the burden of the current economic difficulties on the people.

One of the main factors contributing to the current crisis and the resulting difficulties is the lack of foreign exchange liquidity in the banking system.

This shortage of foreign exchange liquidity has affected the supply of essential imports, including fuel. In order to ensure adequate foreign exchange liquidity in the banking system, the CBSL had to impose redemption obligations on export earnings. In addition, measures have been taken by the government and the CBSL to discourage outflows of foreign currency, such as imposing restrictions on certain imports and payment terms and introducing margin requirements, while encouraging inflows. through the banking system, rather than through the gray market. .

The success of these regulatory measures and the ability to achieve the intended results depends on the support and cooperation of the trading community and the banking system. However, it has come to the attention of the CBSL that some market participants do not fully comply with these regulations. Such a practice, if continued, would deprive the population of the support expected from the government in difficult times, while undermining the moral obligation of “equal burden sharing” that is expected of all stakeholders in difficult and extraordinary circumstances. .

In this context, and in the best interests of the nation, CBSL wishes to reiterate to all actors in the economy that in the future, every effort will be made to strictly monitor and ensure compliance with all regulations on foreign exchange transactions, including export earnings repatriation requirements, mandatory conversions and sales to the CBSL, etc.

Any instances of non-compliance will be subject to severe action under the provisions of all applicable laws.

It should be noted that the CBSL has enhanced its capacity in foreign exchange monitoring through the implementation of the Export Commodity Monitoring System (EPMS) and the International Transaction Reporting System (ITRS), which is a comprehensive cross-border transaction monitoring system. domestic transactions and transactions in foreign currencies.

These systems facilitate regular monitoring of currency inflows and outflows. In addition, the assistance of independent professional bodies, including audit firms, is also sought for the timely identification of any malpractice.

Therefore, licensed banks and the trading community are urged to comply with existing regulations and complement the efforts of the government and CBSL to provide much needed assistance to all stakeholders in the economy under these extremely difficult circumstances.

The export trading community is urged to continue to repatriate all export proceeds within the stipulated timeframes and return residual earnings in accordance with regulations. The banking community is urged to ensure strict compliance with all foreign exchange regulations.

The government and CBSL are continuing their relentless efforts to secure bridge financing to reduce and ease short-term economic strains. Significant progress has been made in the ongoing negotiations on an economic adjustment program with the International Monetary Fund. The debt restructuring process is also underway, with the competent assistance of legal and financial advisers. The government and the CBSL remain committed to implementing much-needed reforms to overcome long-standing structural problems in the economy.

The Central Bank would like to reiterate that overcoming the current economic difficulties and difficulties requires substantial and concerted efforts by all players in the economy. Foul play by any stakeholder group would inevitably lead to a deepening of the crisis, with widespread detrimental effects. It is everyone’s duty to act conscientiously and responsibly, and to lend unhindered support during this hour of need, so that the nation recovers quickly and emerges stronger from this crisis.