Sri Lanka’s decision to gazette the Repatriation of Export Proceeds into Sri Lanka Rules No. 01 of 2026 through Extraordinary Gazette No. 2473/30 marks one of the most consequential foreign exchange policy shifts since the economic crisis. The move, approved by Cabinet and introduced under the authority of the Central Bank of Sri Lanka in terms of the CBSL Act No. 16 of 2023, is widely seen as a response to a persistent yet understated issue: the retention of export earnings in overseas accounts by some Sri Lankan exporters.
Sri Lanka generates between USD 15 and 17 billion annually from merchandise and services exports in a normal year. Apparel giants such as MAS Holdings and Brandix, tea exporters including Dilmah Ceylon Tea Company, and diversified conglomerates like Hayleys PLC collectively command billions in foreign currency inflows. Yet industry analysts estimate that during the peak of the 2021–2023 crisis, between 10 and 25 percent of export proceeds were either delayed in repatriation or retained abroad for working capital, debt servicing, or reinvestment. Even a conservative 15 percent retention translates into more than USD 2 billion annually not fully entering Sri Lanka’s formal banking system.
The economic consequences of this practice are profound. In 2022, official reserves fell below USD 2 billion at one point, contributing to sovereign default and severe import restrictions. While exporters argue that holding foreign currency abroad protects against exchange rate volatility and ensures uninterrupted import financing, the macroeconomic reality is that unreturned export proceeds tighten domestic dollar liquidity, increase pressure on the rupee, and compel the State to borrow externally at high cost.
The Government’s latest regulations seek to shift the equation from compulsion to incentive. By amending earlier 2024 rules, authorities are broadening access to local foreign currency denominated loan instruments, particularly Dollar Bonds issued through commercial banks. The first issuance on 10 December 2025 was limited due to regulatory constraints, but the revised framework aims to allow exporters themselves to invest repatriated funds directly into these instruments.
This strategy is economically rational. Encouraging exporters to park their dollars in local bonds rather than foreign banks could deepen the domestic foreign currency capital market and ease pressure on reserves. Redirecting even USD 1 billion into such instruments would significantly strengthen external buffers and reduce reliance on emergency funding.
However, regulation alone cannot solve what is fundamentally a confidence issue. Exporters cite abrupt policy changes, currency depreciation exceeding 80 percent during the crisis, and uncertainty in fiscal measures as reasons for maintaining offshore liquidity. Without sustained exchange rate stability, predictable tax policy, and credible monetary governance, compliance may remain technical rather than enthusiastic.
The Government’s move is a necessary corrective step, but its success will depend less on enforcement and more on rebuilding trust between policymakers and the private sector. In a fragile post-crisis economy, every export dollar matters, and ensuring those dollars circulate within Sri Lanka may prove decisive for long-term stability.