ECONOMYNEXT – Sri Lanka’s banks have been ordered to surrender 25 percent of dollars sold by customers to the central bank up from an existing 10 percent, in a direction issued to chief executives.
The rule will be effective from December 27.
Up to now banks were ordered to sell 10 percent of dollar receipts to the central bank.
Exporters were previously ordered to sell all dollars received after deducting dollars for inputs and debt repayments.
Similar rules are found in other countries with flexible exchange rates (downward crawling soft-pegs) where the central banks print money.
The central bank is also offering an extra 10 rupees above the 200 rupees to the US dollar official rate for dollars converted by expatriate workers until January 31, 2022.
Sri Lanka’s forex reserves fell to 1.58 billion US dollars in January after the central bank provided convertibility to printed money.
As convertibility was progressively reduced to new rupees, parallel exchange rates emerged. Now kerb market rates are around 240 and Hawala/Undiyal outward remittances are around 250 rupees to the US dollar.
By November money printing through bond auctions were halted and now liquidity is injected through the sterilization of limited interventions. (Colombo/Dec27/2021)