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Tuesday February 27th, 2024

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.

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: dfe@cbsl.lk
c. From any Authorized Dealer in Sri Lanka.

(Colombo/July14/2020)

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Sri Lanka president appoints Supreme Court-faulted official as police chief after CC clearance

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe appointed Deshbandu Tennakoon as the 36th Inspector General of Police (IGP) of the country after the Constitutional Council (CC) cleared the official who along with three other police officers were asked by the Supreme Court to compensate 2 million rupees in a fundamental rights case last year.

“President Ranil Wickremesinghe has appointed Deshbandu Tennakoon as the IGP in accordance with the provisions of the Constitution,” the President’s Media Division (PMD) said.

The island nation’s Supreme Court on December 14 ordered Tennakoon when he was the Acting IGP and three other officials to pay a compensation of 500,000 rupees each for the violation of the fundamental rights of an individual.

The Supreme Court also instructed the Police Commission to take disciplinary action against the said Police officers after it considered the petition filed by W. Ranjith Sumangala who had accused the Police officers of violating his fundamental rights during his detention at Mirihana Police Station in 2011.

The Supreme Court held that the four police officers violated the fundamental rights of the petitioner by his illegal arrest, detention and subjection to torture at the Mirihana Police Station, which was under the supervision of Tennakoon at the time of the arrest.

President’s Secretary Saman Ekanayake presented the official appointment letter to Tennakoon on Monday (26) at the Presidential Secretariat.

When Tennakoon was asked over if the Supreme Court decision would have an impact on his appointment as the IGP last week, he declined to comment, saying that it was a Supreme Court matter and he does not want to say anything about it.

Tennakoon was also criticized by Colombo Archbishop Cardinal Malcolm Ranjith when he was appointed as the Acting IGP citing allegations against him related to security lapses leading up to the Easter Sunday attacks which killed at least 269 in April 2019.

However, Tennakoon rejected the allegations. (Colombo/Feb 26/2024)

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No water tariff hike in Sri Lanka this year: Minister

Millennium Challenge Corporation Photo.

ECONOMYNEXT – Sri Lanka’s planned water tariff formula is ready, and the government will implement it this year only if the formula’s tariff is lower than the current price, Water Supply Minister Jeevan Thondaman said.

President Ranil Wickremesinghe’s government has been implementing IMF-led pricing policies on utilities and the Water Supply Ministry has already come up with a formula.

“There is a water tariff formula in place right now and we are waiting for it to be drafted and seek approval from the cabinet,” Thondaman told reporters at a media briefing in Colombo on Monday.

“Once this water tariff formula is in place, there will be an annual revision with an option of biannual review.

The formula has been developed with the help of the Asian Development Bank. The formula includes electricity and exchange rate among many others as components like the fuel formula.

The National Water Supply and Drainage Board (NWS&DB) increased the water tariff in August 2023, claiming that the operating cost had been increased owing to high interest payment for bank loans and increased electricity prices.

The last year revision saw the consumers paying 30-50 percent increase from the existing water bill.

Minister Thondaman said he will implement the new formula this year only if there is a reduction.

TARIFF CUT WILL BE IMPLEMENTED 

“We will have to wait to see what the formula is. If the formula shows us there needs to be a reduction in the water tariff, we can implement it. But if there is an increase, why should we burden the people when we are on a road to recovery?” he said.

He said a group of experts including University Professors are working on the formula and the numbers.

“Once they come with the number, we will have to take a decision on whether we are going to impose on the people or not,” he said.

“We have already spoken to the Asian Development Bank and informed them we have established the formula. But according to the ADB requirement of this policy-based loan, the implementation period is only in 2025.”

“But right now, you want to take the approval for the formula for sustainability.”

The Energy Ministry is considering a drastic slash in electricity tariff soon. Thondaman said the exact numbers will be decided on after the finalized electricity tariff.

However, he said that as per the formula, there has to be a up to 10 percent increase in the water tariff as of now.

“Given the current formula set up, there must be around a 9-10 percent increase. It was actually at 14 percent. What we have done is since it is at 14 percent, we also did a calculation to see how we can do a cost cutting,” he said.

“So, despite our cost cutting measures, there will be an increase of 9 or 10 percent. But we will not be imposing it as of now because this year is meant to be policy sector reforms. Next year is meant to be the implementation.”

“As per August 2023 water tariff hike, we are able to come close to sustainable. So right now, there is no issue in the water sector. But a formula eventually needs to be established.” (Colombo/Feb 26/2024)

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Sri Lanka rupee closes at 310.80/311.00 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 310.80/311.00 to the US dollar Monday, from 310.95/311.05 on Thursday, dealers said.

Bond yields were down.

A bond maturing on 01.02.2026 closed stable at 10.60/80 percent.

A bond maturing on 15.09.2027 closed at 11.80/90 percent down from 11.90/12.05 percent.

A bond maturing on 15.03.2028 closed at 12.00/12.15 percent down from 12.10/25 percent.

A bond maturing on 15.07.2029 closed at 12.20/70 percent from 12.20/95 percent.

A bond maturing on 15.05.2030 closed at 12.30/70 percent down from 12.40/95 percent.

A bond maturing on 15.05.2031 closed at 12.60/80 percent from 12.45/13.00 percent.

A bond maturing on 01.07.2032 closed at 12.50/90 percent from 12.50/13.30 percent. (Colombo/Feb26/2024)

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