08 January 2022
Repatriation and conversion of export earnings and incentive program to attract
Increased worker remittances
Recent rules issued by the Central Bank of Sri Lanka (CBSL) regarding the repatriation and conversion of export earnings into Sri Lankan Rupees (LKR) have been misinterpreted by some parties with special interests. In particular, unfounded speculation has been maliciously spread that CBSL rules require the conversion of all workers’ remittances forcibly in LKR upon receipt of these foreign currency funds by approved banks. Export earnings conversion rules DO NOT apply to workers’ remittances. Migrant workers who channel their income through licensed banks and other formal channels can hold these foreign currency funds at any commercial bank. As a result, it is NOT mandatory for Sri Lankans working overseas to convert their remittances to LKR. However, those who wish to convert this income into LKR would be eligible to do so while those who do so under the “Incentive scheme on inbound worker remittances” announced by CBSL, would receive an additional incentive of Rs. 10.00 per US dollar until January 31, 2022.
The product of “Exports of services” are the foreign exchange earnings of resident Sri Lankans who provide tourism, professional services, etc. to non-residents. These exports of services would be subject to the rules for converting the residual export product after adjustment of the allowable deductions. In this context, it would be clear that the recent rules on repatriation and conversion of export earnings into LKR only apply to Sri Lankan “exporters of goods and services”, and that the new rules require exporters that they convert only the balance of export earnings into LKR after deduction of the authorized payments specified in the rules. In fact, these authorized payments cover remittances relating to current transactions, authorized foreign currency withdrawal, debt service charges, purchases of goods and services, and investments in Sri Lanka Development Bonds ( SLDB). It should also be noted that similar repatriation and conversion rules for service export earnings are also applicable in other countries in the region, including India, Bangladesh, Pakistan and Thailand.
The CBSL reiterates that it will continue to facilitate the improvement of workers’ remittances in collaboration with the government by incentivizing funds disbursed through formal channels, as previously announced, while bringing severe legal proceedings against all persons (those who send and receive) who engage in illegal fund transfers. Accordingly, the general public is urged to remain vigilant and not to be misled by false information and promises.
Authorized Banks are also advised to strictly comply with the rules stipulated by the CBSL with regard to the conversion of clients’ foreign exchange products, and to inform their clients of these rules, in order to avoid any misunderstanding.
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