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Sri Lanka collects US$360mn from special forex accounts, extra time given

ECONOMYNEXT – Sri Lanka’s banks had collected 360 million dollars into special deposit accounts that pay extra interest, and the time to open them has been extended beyond April 2021, the government said.

The cabinet of ministers had cleared a proposal to extend the time period for the special deposit account which was due to expire on April 2021, to “encourage parties who wish to deposit money further” a statement said.

Regulations have been issued under the Foreign Exchange Act of 2017 to enable the opening of the accounts.

Sri Lanka’s central bank said it would pay 2 percent extra interest for the deposit accounts.

Sri Lanka has run into severe foreign exchange shortages under extraordinary bout of money printing under so-called ‘Modern Monetary Theory’ despite operating a soft-pegged exchange rate, severely undermining its credibility and triggering credit downgrades.

Sri Lanka has been following lack of rule based monetary policy for several years under ‘flexible exchange rate (no credible external anchor) and flexible inflation targeting (no credible domestic anchor) while targeting output, triggering a series of currency crises.

The central bank has no mandate for growth. (Colombo/Apr06/2021)

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