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Sri Lanka allows US$15,000 to be kept in possession, deposit in SDA forex account

ECONOMYNEXT – Sri Lanka has allowed up to 15,000 US dollars or equivalent to be kept in possession up from 10,000 dollars earlier and a similar amount brought to the country in 2020 could also be deposited in a special Coronavirus special deposit account before October 07.

The central bank said 87 million US dollars had flowed into Special Deposit Accounts which were introduced in 2020 as the rupee came under pressure earlier in the year.

The central bank is paying extra interest above market rates paid by commercial banks for the Coronavirus accounts.

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The rupee fell close to 200 to the US dollar as money was printed driving excess liquidity up, but the peg was not fully defended against the liquidity (flexible exchange rate) amid strong private credit in March, leading to early covering by importers and also capital flight by bond holders.

The central bank said foreign exchange up to 15,000 dollars acquired legally and brought to Sri Lanka after January 01, 2020 could be placed in the Coronavirus SDA accounts.

If it is more than 15,000 dollars a declaration has to be made at Sri Lanka customs on arrival.

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Depositors would also be allowed to borrow against the foreign exchange. Residents would have to get rupees.

The central bank is allowing allowing Sri Lanka citizens to keep up to 15,000 US dollars in their possession up to 10,000 US dollars earlier, in an effective relaxation of legal tender laws.

Modern central banks operate monopolies on their money regardless of bad monetary policy (depreciation and inflation) by limiting the possession, transactions and denomination by foreign currencies.

The full statement is reproduced below:

Department of Foreign Exchange

13 July 2020

Further Measures to Encourage Opening of Special Deposit Accounts

The Government of Sri Lanka introduced the Special Deposit Account (SDA) on 08.04.2020 to seek assistance for the national effort to overcome the effects of COVID-19 outbreak in the country. It is encouraging to note that there is a favorable response on the same and so far, Sri Lanka has received USD 87 mn (approx.) into SDAs.

The Government of Sri Lanka in consultation with the Monetary Board of the Central Bank of Sri Lanka has taken further measures to encourage opening of SDAs as stated below.

1. Expansion of the sources of funding SDAs

a. Any person who has arrived in Sri Lanka from overseas on or after 01.01.2020 can open SDAs with any Authorized Dealer on or before 07.10.2020, out of foreign exchange legitimately acquired and brought into Sri Lanka by such person subject to:

i. a declaration made to the Sri Lanka Customs at the port of arrival where the amount of such foreign exchange exceeds USD 15,000 or an equivalent amount in any designated foreign currencies.

ii. a declaration to the relevant Authorized Dealer where the amount of such foreign exchange is equal or less than USD 15,000 or an equivalent amount in any designated foreign currencies.

b. Any person in, or resident in, Sri Lanka can open SDAs with any Authorized Dealer on or before 07.10.2020, out of foreign currency notes in his possession up to the limit of USD 15,000 and subject to such terms and conditions of the prevailing Regulations and Orders, subject to a declaration on the source of funds to the Authorized Dealer.

c. In this regard, the amount of foreign currency that can be retained by a person in, or resident in Sri Lanka in his possession has been increased from USD 10,000 to USD 15,000 with effect from 01.07.2020.

2. Obtaining loans against SDAs

SDA holders can obtain loans from Authorized Dealers against SDAs as follows;

a. Residents in Sri Lanka Rupees

b. Non-resident SDA holders who are eligible to obtain loans as per the prevailing regulations

Further information on the above can be obtained as follows:

a. By accessing the following which are available under “Downloads” in the official website of the Department of Foreign Exchange of CBSL (www.dfe.lk).

i. Regulations published in the Government (Extraordinary) Gazette Notification No. 2170/4 dated 08.04.2020.

ii. Regulations published in the Government (Extraordinary) Gazette Notification No. 2182/32 dated 01.07.2020.

iii. Order issued under Section 8 of the Foreign Exchange Act, No. 12 of 2017 published in the Government (Extraordinary) Gazette Notification No. 2182/33 dated 01.07.2020.

iv. Directions No. 06 of 2020 dated 06.07.2020 issued to Authorized Dealers.

b. From the Director, Department of Foreign Exchange, Central Bank of Sri Lanka, No.30, Janadhipathi Mawatha, Colombo 01.

Tel: +94 112 477 255, + 94 112 477 244, +94 112 477 433
Email: [email protected]
c. From any Authorized Dealer in Sri Lanka.

(Colombo/July14/2020)