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Sri Lanka central bank stops ‘non-essential’ imports, limits forex issue

ECONOMYNEXT – Sri Lanka’s central bank has controlled imports and limited the issue of foreign exchange for foreign travel amid pressure on the forex market and dollar bonds.

Sri Lanka has made a series of liquidity injections in recent weeks, raising concerns for the rupee.

The rupee fell below 187 to the US dollar in the spot market Thursday.

The central bank also ordered banks not to buy dollar sovereign bonds.

The full statement is reproduced below.

Communications Department

19.03.2020

The Central Bank of Sri Lanka introduces Urgent Measures to Ease the Pressure on the Exchange Rate and Prevent Financial Market Panic due to the COVID-19 Pandemic

As per the provisions of the Monetary Law Act No. 58 of 1949, the Banking Act No. 30 of 1988, and the Foreign Exchange Act No. 12 of 2017, the Central Bank of Sri Lanka introduced several measures to ease the pressure on the exchange rate and prevent financial market panic due to the COVID-19 pandemic.
Accordingly, licensed commercial banks and National Savings Bank are directed to adopt the following measures during the next three months, with immediate effect:

1. Suspend facilitating importation of all types motor vehicles, other than those excluded specifically under Banking Act Directions No.01 of 2020, under Letters of Credit

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2. Suspend facilitating importation of non-essential goods specified in Banking Act Directions No.01 of 2020, under Letters of Credit, Documents Against Acceptance and Advance Payment

3. Suspend the purchase of Sri Lanka International Sovereign Bonds by licensed banks in Sri Lanka
In addition, Authorised Dealers of foreign exchange are only allowed to issue foreign currency notes as travel allowance up to a maximum of USD 5,000 (or its equivalent in other foreign currency).

The Central Bank will continue to monitor market developments and take further measures as required, while ensuring adequate liquidity in the market in order to facilitate smooth operations and sustain market confidence amidst the COVID-19 outbreak. (Colombo/Mar18/2020)