Govt. extends forex restrictions by 6 more months

• PM issues relevant gazette extending order for 6 more months from 2 Jan.
• Measures taken to restrict outflow of foreign currency

By Chandani Kirinde

The Government has extended the period of validity of the measures introduced in July to restrict the outflow of foreign currency by a period of another six months effective from 2 January 2021.

Prime Minister Mahinda Rajapaksa who is also the Minister of Finance issued the relevant Gazette notification extending the validity of the order made under the Exchange Act, No. 12 of 2017 in July.

The restrictions came into effect in April initially for three months. In July they were extended for six month and now for another six months.

The measures have been taken to preserve the foreign currency reserve position of the country due to the possible negative impact to the economy due to the outbreak of the COVID-19 pandemic.

These include the suspension of general permission granted to make outward remittances for investments overseas through the outward investment accounts by persons resident in Sri Lanka excluding the following:

a. investments to be financed out of foreign currency loans obtained by the investor from a person resident outside Sri Lanka under the provisions of the Foreign Exchange Act,

b. an additional investment to be made to fulfil the regulatory requirement in the investee’s country applicable on the investment already made in a company or a branch office in that country,

c. an additional investment/infusion of funds to be made by eligible resident companies in already established subsidiaries or branch offices in overseas up to a maximum of $20,000, for the purpose of working capital requirements of the investee,

d. the remittances up to a maximum of $20,000, for the purpose of maintenance of liaison, marketing, agency, project, representative or any other similar offices already established overseas.

The Order also suspends the outward remittances through Business Foreign Currency Accounts (BFCAs), or Personal Foreign Currency Accounts (PFCAs) held by persons resident in Sri Lanka, other than for the remittances on current transactions up to any amount or capital transactions up to a maximum of $ 20,000.

It limits the eligible migration allowance for emigrants who are claiming the migration allowance for the first time, up to a maximum of $ 30,000 and limits the repatriation of funds under the migration allowance by emigrants who have already claimed migration allowance up to a maximum of $ 20,000.

The Monetary Board has the authority to grant permission in terms of the Section 7(10) of the Foreign Exchange Act for the investments on a case-by-case basis which exceeds the limits specified provided that the proposed investment is to be financed out of a foreign currency loan obtained by the investor from a person resident outside Sri Lanka under the provisions of the Foreign Exchange Act, or the proposed investment is to be made to fulfil the regulatory requirements in the investee’s country applicable on the investment already made in a company or branch office in that country in compliance with the provisions of the Act or repealed Exchange Control Act.