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Sri Lanka attracts US$86mn deposits into Coronavirus accounts

ECONOMYNEXT – Sri Lanka’s special foreign exchange deposit accounts with an open call to resident and non-resident individuals as the rupee came under pressure from a money printing bout had brought in 86.9 million US dollars, Central Bank Governor W D Lakshman said.

“The (Special Depositors Account) trend is not very promising,” Governor Lakshman told reporters.

Sri Lanka set up Special Deposit Accounts (SDA) in mid-April as the rupee came under pressure from pro-cyclical liquidity injections in March amid the novel Coronavirus battle which was compounded by tight cross border dollar liquidity amid a rise in counter party risk perceptions globally.

Insufficient currency defence (flexible exchange rate) amid large volumes of new money printed led to the rupee falling and panic being created among importers who usually settle bills in stages.

The central bank has over the past two weeks withdrawn excess liquidity from money markets after private credit slowed.

When the deposit accounts opened, the central bank said it will pay an additional 1 percent above the market rate for foreign exchange deposited in the accounts.

Deposits for 12 months were paid 2 percent above the standard rate of the bank.

The accounts could be opened at any commercial bank or the National Savings Bank. It was opened to any well-wisher.

“The Special Deposit Accounts will be exempted from any procedural requirements specified in the Foreign Exchange (Classes of Capital Transactions in Foreign Exchange Carried on by Authorized Dealers) Regulations No. 1 of 2017 published in the Gazette Extraordinary Notification No. 2045/56 dated November 17, 2017,” the regulations published under the hand of Finance Minister Mahinda Rajapaksa said.

However the central bank later said know your customer rules aimed at preventing money laundering still applied. (Colombo/July10/2020)