ECONOMYNEXT – Sri Lanka’s central bank is bearing the 8 rupees out of a 10 rupees extra paid to expat workers for remitting US dollars Central Bank Governor Nivard Cabraal said, making it a quasi-fiscal activity.
“The total 10 rupees will be paid to the person who is receiving the remittance,” Governor Cabraal told reporters in Colombo.
“Thereafter we will do a transaction between the government and the central bank, where we would claim 2 rupees and absorb the 8 rupees.”
The central bank is giving the extra payment to lure expat workers away from the Hawala/Undiyal systems which are around 240/250 to the US dollar.
Banks and authorised dealers are giving 10 rupees for dollars encashed by family members of recipients.
Sri Lanka’s official remittance fell 60 percent to 325.2 million US dollars in December 2021, from 813 million dollars a year earlier, but was up from 271.4 million US dollars in November.
The 10 rupee schemed was started in December 2021, and it is unclear to what extend officials remittances would have fallen in the absence of the incentive.
The central bank said on January 20 that the scheme has since been extended till April.
However the central bank is giving dollars back to market at 200 to the US dollar, incurring a quasi-fiscal loss on the transaction and making it a liquidity injection.
However in December the central bank sold over 300 million US dollars, sucking up more money than it injected even if a premium had been paid on the total 325 million US dollar inflow. (Colombo/Jan20/2021)