Saturday, 15 May 2021 09:38

Exporters’protest against conversion of 25 % of dollar earnings to rupees Featured

Exporters have now been grappling to convert 25 percent of their earnings into Sri Lanka Rupees claiming that this policy has increased costs and place more pressure on an already struggling sector.

They criticised the move, insisting that it limits flexibility for business decisions in an environment already severely constricted by COVID-19 and its linked economic fallout

The Central Bank yesterday released details of a Gazette notification published on Thursday that called for exporters to immediately convert into rupees 25% of foreign exchange proceeds they earned. The latest Gazette continues the 180-day repatriation rule as well. Sri Lanka has set a goal of $ 16 billion earnings from exports for 2021.

This idea that exporters hold onto forex outside of the country is a complete fallacy, they claimed.

Most exporters work on credit and they diligently bring their earnings into the country. Typically they use their forex earnings to purchase imports that are needed as intermediate goods to manufacture more exports.

Unfortunately, what this directive will do is force exporters to convert their funds into rupees and then reconvert them for imports, significantly increasing costs and hassle,” a top exporter disclosed.

“Every exporter of goods shall, immediately upon the receipt of such export proceeds into Sri Lanka as required under this Rule, convert 25% from and out of the total of the said exports proceeds received in Sri Lanka into rupees through a licenced bank,” the Gazette said.

He went onto say that most exporters also only need local currency to pay wages and other auxiliary requirements, which are usually less than 25% of their forex earnings.

He also appealed for the Government to take a more consultative approach to exporters and “not kill the golden goose with short-sighted policies”.

The new rules, which came into effect from 18 February, follow on Sri Lanka’s reserves dipping to US $ 4.47 from $4.05 in March , increasing worries over pending debt repayments.

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