CB tinkers again with rules on repatriation of export proceeds

• Reverts to 25% conversion of export proceeds within 30 days of receipt but less with a floor of 10% for export sectors which incur high percentage of imported inputs

The Central Bank has once again tweaked the rules on repatriation of export proceeds with new directives issued via an Extraordinary Gazette effective last Friday (28 May).

The Extraordinary Gazette bearing the number 2229/9 contains fresh Rules under Repatriation of Export Proceeds into Sri Lanka Rules No. 4 of 2021. It contains amendments to previous issued Rules No. 1 of 2021 in February, Rules No. 2 of 2021 in March and Rules No. 3 of 2021 in April.

The Central Bank has gone back to the conversion of 25% of the export proceeds within 30 days of receiving such proceeds. Earlier the amount was 10% revised in April from 25% in March. 

However, as per the new Gazette and Rules, the Monetary Board may however determine the specific export sectors or industries or individual exporters, who or which may be permitted to convert less than 25% of the total of the export proceeds received, if the Monetary Board is satisfied, in its discretion, that the export goods and processes of such export sector, industry or exporter, utilise a very high percentage of imported goods that cannot be sourced domestically.

This however will continue to be subject to not below 10% conversion of the export proceeds and received no later than 180 days from the date of shipment. 

Additionally, the Monetary Board may in general, having regard to the liquidity situation in the foreign exchange market and the Gross Official Reserve levels in Sri Lanka, determine from time to time, such other percentage as the case may be, of the export proceeds received in Sri Lanka, that shall be converted into Sri Lanka Rupees through a Licensed Bank as the Monetary Board may deem fit and appropriate in the prevailing circumstances.

The latest move comes as the country grapples with saving reserves whilst facing foreign debt servicing challenge this year amidst the impact of the COVID pandemic. 

As of end-April, gross official reserves were estimated at $ 4.5 billion, equivalent to 3.2 months of imports. This does not include the bilateral currency swap facility (worth 10 billion yuan) with the People’s Bank of China (PBoC).

As per provisional data Sri Lanka’s merchandise exports in April amounted to $ 799 million, 183% higher than last year April, but 25% below the March 2021 figure of $ 1 billion. April performance boosted the first four months export figure to $ 3.7 billion, up 30% from $ 2.9 billion last year.

The target set for exports this year is $ 12 billion as against $ 10 billion in 2020 which was 16% lower than $ 11.9 billion achieved in 2019.