COVID-19 crisis triggers cry for forex flow

• Central Bank, Treasury make joint appeal for foreign currency deposits from Sri Lankans living abroad and here, as well as charity organisations, well wishers
• Assure all forex remittances will be exempted from exchange control regulations and taxes, and protected under banking secrecy provisions
• 3-month offer aimed at boosting reserves and economy to face COVID-19 challenge, ensure healthcare and social security to people of Sri Lanka
• Analysts say success of new initiative depends on assurance of no legal or Inland Revenue action later on

Under pressure from dwindling reserves, debt repayment and COVID-19 impact on the country, the Government yesterday sent an open invitation to all Sri Lankans abroad, as well as locals having foreign currency holdings, to deposit same with guarantee of secrecy and convertibility.

CB Governor Prof. W.D. Lakshman

Treasury Secretary S.R. Attygalle

It said the offer is valid only for three months, starting from 2 April, and follows Cabinet deciding the same at its meeting on Wednesday.

In an unprecedented joint initiative, the Central Bank and the Ministry of Finance issued an appeal to all Sri Lankans to do so as a gesture of goodwill, and assist Sri Lanka's efforts to strengthen healthcare and social security, as well as the economy, amidst the challenge of mitigating the spread of COVID-19 and post-crisis recovery and development.

"We guarantee that foreign currency deposits will be accepted without any hindrance from the Government, the Central Bank or any other authority. We also guarantee the future convertibility of these deposits into foreign currency whenever you desire to do so. All your forex remittances will be exempted from exchange control regulations and taxes and protected under banking secrecy provisions," said the Government request.

Gross official reserves stood at $ 7.5 billion at end January 2020, equivalent to 4.5 months of imports. Total foreign assets consisting of gross official reserves and foreign assets of the banking sector amounted to $ 10.3 billion at end January 2020, equivalent to 6.2 months of imports.

The Rupee has depreciated sharply by 4.7% by end March, with the speculative behaviour in the market given the COVID-19 outbreak.

Sri Lanka has to repay a total of $ 4.8 billion this year, with the next large payment of $ 1 billion due in September.

Analysts said the success of a proper amnesty to draw foreign currency into Sri Lanka hinges on the Government amending the Exchange Control laws among others. Previous attempts had failed because of the fear that the Inland Revenue Department would come after those who have remitted funds. “The Government must give an undertaking by law that those who is making use of the three month window would not be penalised or harassed thereafter, or by a future regime,” a financial expert said.

Following is the full text of the appeal signed by Central Bank Governor Prof. W.D. Lakshman and Treasury Secretary S.R. Attygalle:

The Central Bank of Sri Lanka invites all Sri Lankans and well-wishers living in Sri Lanka and abroad to consider depositing their savings and other funds in foreign currency within the Sri Lankan banking system – licensed commercial banks and specialised financial institutions – as a gesture of goodwill and assistance to Sri Lanka and its people during the three month period commenting from 2 April 2020, in support of the wide-ranging national effort to safeguard the people from coronavirus, to bring its spread under control and to provide healthcare and social security to the people.

 Your foreign currency deposits in the Sri Lankan banking system at this difficult stage will be of immense help to authorities to tide over the present crisis.

We guarantee that your foreign currency deposits into the Sri Lankan banking system will be accepted without any hindrance from the Government, the Central Bank or any other Government authority. We also guarantee the future convertibility of these deposits into foreign currency whenever you desire to do so. All your forex remittances will be exempted from exchange control regulations and taxes and protected under banking secrecy provisions.

This appeal goes to all Sri Lankan expatriates abroad and those living in Sri Lanka with foreign exchange holdings. The country welcomes remittance inflows to the banking system in Sri Lanka from them as well as from charitable organisations, funds and well-wishers all over the world with the wellbeing of Sri Lanka and its people in their hearts. Such remittances would go a long way to promote people’s welfare during the current period of still-spreading COVID-19 and economic revival in the immediate aftermath.

This announcement and appeal are made following a decision of the Government of Sri Lanka made during the 1 April meeting of the Cabinet of Ministers. The Cabinet has decided to suspend all restrictions on foreign currency inflows into Sri Lanka during the COVID-19 preventive period, defined as the three months commencing 2 April 2020.