Sri Lanka awaiting Paypal’s response to start inward remittances: CB Governor

ECONOMYNEXT – Sri Lanka is awaiting Paypal’s response after exempting the payment system from the country’s exchange controls, to start inward remittances, Central Bank Governor Arjuna Mahendran said.

Sri Lanka was left out of Paypal’s network of countries where inward remittances could be made because the island’s exchange controls did not allow refunds to be made, Mahendran said.

Sri Lanka already allows credit card refunds to be made.

People who buy goods with Paypal payments are given money back guarantees," Governor Mahendran explained.

"Sri Lanka’s exchange controls are quite strong and it was not permitted to refund money."

Mahendran said a new exchange management law would relax many of the controls, including that for Paypal and similar payment systems but the law would take some time.

In the meantime the Controller of Exchange, using his powers had exempted Paypal from the exchange control requirements.

Mahendran said Sri Lanka was now awaiting a response from Paypal who ‘had a battery of lawyers’ who wanted the issue to clear.

Sri Lanka tightened exchange controls progressively after 1951 when the Central Bank was created with money printing powers.

When the central bank buys Treasury bills with printed money, credit and imports exceed dollars inflows, generating balance of payments crises, generating economic instability and impoverishing the population by destroying real savings and wages.

Instead of halting the printing of money to finance deficit Sri Lanka imposed draconian exchange and trade controls.

Economists and analysts have called for the central bank to be abolished and a currency board re-stablished so that the state loses its most effective tool to generate poverty. (Colombo/Feb26/2016)