Business Sri Lanka

Sri Lanka tightens trade rules to boost currency reserves; which eroded 79% from 2019-2021

COLOMBO, March 12- Sri Lanka’s Central Bank tightened trade restrictions on Saturday, ordering exporters to repatriate foreign exchange earnings within 180 days of transactions in a bid to improve country’s depleting foreign exchange reserves.

Sri Lanka is tackling its worst financial crisis in over a decade, struggling to pay for critical imports including fuel, food and medicines and with just $2.31 billion of reserves.

The bank’s moves include mandatory currency conversion for exporters of goods and services to change their foreign exchange earnings into Sri Lankan rupees.

“All licensed banks are required to strictly monitor receipts of goods to Sri Lanka,” the central bank stated in a notification, adding that it “has the right to initiate action against non-compliance by any exporter or licensed banks”.

The state-run oil company on Friday increased prices by 55 to 95 rupees (22-24 cents) per litre for most fuels to offset losses after Sri Lanka introduced a flexible exchange rate that saw the rupee plunge 30% to 260 rupees to the dollar.

Currency Erode

Sri Lanka’s reserves have declined by 79% from 2019 to 2021, the has reported.

Sri Lanka’s pioneering public finance platform said the decline has been observed at a time when the country’s regional peers have experienced a growth.

The decline in the reserves cannot be solely attributed due to the pandemic, it said.

The Public Finance further said if it was the case, other Asian counterparts should have experienced the same decline.

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