By: Staff Writer
June 11, Colombo (LNW): Sri Lanka’s Central Bank has unveiled a significant regulatory adjustment that could reshape how export earnings flow through the country’s financial system, raising questions about the balance between market flexibility and currency stabilization.
The new rules require exporters to convert leftover foreign currency proceeds into Sri Lankan rupees by the 10th day of the following month after settling approved foreign currency expenses. The directive, issued through the Repatriation of Export Proceeds into Sri Lanka Rules No. 2 of 2026, amends regulations introduced two years earlier and marks the latest effort by authorities to manage foreign exchange liquidity.
The timing of the move has drawn attention across financial markets. Recent weeks have seen growing demand for US dollars, particularly from importers seeking to lock in foreign exchange ahead of future obligations. Simultaneously, exporters have been accused by some market participants of postponing conversions while waiting for a potentially weaker rupee and better exchange rates.
The resulting mismatch between dollar demand and supply has added strain to the foreign exchange market. Currency dealers reported increased volatility, with the rupee closing at Rs. 337.00/337.75 per US dollar in yesterday’s spot market trading.
Officials believe the revised rules will channel more export proceeds back into the formal banking sector, boosting liquidity and improving access to foreign exchange. By requiring exporters to convert residual balances every month, authorities hope to reduce the volume of export earnings held outside active market circulation.
The regulations continue to allow exporters substantial flexibility in meeting legitimate foreign currency requirements. Approved uses include operational expenses linked to exports, repayment of foreign currency loans, dividend distributions to non-resident shareholders, salaries for expatriate employees, overseas travel expenses related to business activities, and investments of up to 10 percent of export proceeds in government foreign currency debt securities.
Payments to indirect exporters with foreign currency commitments also remain permissible under the framework. However, any balance remaining after these transactions must be converted into rupees within the stipulated period.
The amendment’s reach extends beyond direct exporters. Indirect exporters receiving foreign currency payments from export-oriented businesses will also be subject to the same conversion requirements, broadening the regulation’s impact across supply chains.
Observers note that the policy reflects lessons learned during Sri Lanka’s economic crisis, when authorities tightened foreign exchange controls to protect reserves and support the balance of payments. At that time, exporters were required to convert proceeds within 30 days. As economic conditions improved, those restrictions were gradually eased, eventually allowing exporters to retain earnings for up to 90 days.
While the latest measure stops short of reinstating the earlier emergency-era requirement, it signals a more proactive approach to managing foreign exchange flows. Coming after consultations between the Central Bank and market participants, the move underscores the regulator’s determination to maintain stability and prevent disruptions in a market still recovering from years of economic turbulence.