CoPF probes tourism data gaps, informal forex flows and illegal foreign payment gateways

• CBSL says tourism earnings remain one of the most difficult areas to measure accurately
• Informal Hawala and Undiyal activity monitored through parallel market forex premiums
• MP Ravi Karunanayake raises concerns over foreign businesses using overseas payment gateways in Sri Lanka 

Parliament’s Committee on Public Finance (CoPF) has flagged concerns over weaknesses in the measurement of tourism earnings, informal foreign exchange transactions, and the growing use of unauthorised foreign payment gateways, highlighting several blind spots in Sri Lanka’s economic data and foreign exchange monitoring framework. 

The issues emerged last week during a discussion with Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe on the compilation of external sector statistics and balance of payments data. 

Responding to questions from lawmakers, the Governor acknowledged that tourism earnings remained one of the most challenging areas of economic data collection.

Unlike merchandise exports, which are recorded through Customs declarations, tourism receipts are largely estimated using visitor arrivals, average duration of stay, and spending assumptions, making precise measurement difficult. 

Dr. Weerasinghe noted that tourism activity spans a broad range of businesses, including hotels, homestays, Airbnb operators, and other informal accommodation providers, many of which may not be fully captured through formal reporting systems.

“It is difficult to quantify because tourism is a broad-based activity. A lot of informal businesses may not come through the system, making it difficult to trace all transactions,” he said. 

The Governor also pointed to difficulties in reconciling trade and financial transactions, noting that export proceeds are often received months after goods are shipped, creating timing differences within balance of payments accounts. 

CoPF Chairman Dr. Harsha de Silva recalled earlier discussions with CBSL officials regarding weaknesses in monitoring service exports compared to merchandise exports and queried what steps were being taken to improve data quality. 

The Committee also examined the continued presence of informal foreign exchange channels, including Hawala and Undiyal networks.

The CBSL said it had introduced a regulatory framework for money value transfer services and invited operators to register with the CBSL in an effort to bring informal transactions within the formal financial system. 

The Governor said one of the key indicators used to monitor informal market activity was the premium between official and parallel market exchange rates.

He noted that during the 2022 crisis, some buyers were willing to pay substantially above official market rates for dollars, indicating elevated levels of informal market activity. However, those premiums have narrowed considerably in recent years. 

MP Ravi Karunanayake separately raised concerns about foreign-operated businesses allegedly using overseas payment gateways while conducting transactions within Sri Lanka, potentially resulting in foreign exchange earnings bypassing the domestic banking system and reducing tax collections. 

He argued that some businesses were processing local card payments through foreign systems, allowing earnings to remain offshore despite transactions taking place in Sri Lanka. 

Responding, CBSL officials said such practices would be illegal if carried out without proper authorisation.

Officials disclosed that investigations had been conducted in several tourist areas following reports that foreign businesses were using non-approved payment systems. They noted that card acquiring services require licences issued by the CBSL and said law enforcement authorities were examining reported violations.