By: Staff Writer
June 21, Colombo (LNW): A decision by the Committee on Public Finance (COPF) to approve stricter foreign exchange regulations has triggered debate over their potential impact on market confidence, as lawmakers warned that the measures could add pressure to Sri Lanka’s currency market.
The regulations, titled the “Repatriation of Export Proceeds into Sri Lanka Rules No. 2 of 2026,” were approved by COPF after extensive discussions with Central Bank officials. Published under Extraordinary Gazette Notification No. 2492/10, the rules significantly shorten the time exporters have to convert foreign currency earnings into Sri Lankan rupees.
Under the amended framework, exporters who bring export proceeds into the country during a given month must use those funds only for approved transactions. Any remaining foreign currency balances must be converted into rupees by the 10th day of the following month.
The requirement marks a major shift from regulations introduced in 2024, which allowed exporters up to three months to convert retained foreign currency holdings.
Central Bank officials defended the tighter timeline, telling the Committee that recent exchange rate fluctuations and periodic shortages of foreign exchange liquidity had necessitated urgent action. According to the CBSL, accelerating conversions would help improve the availability of foreign currency within the domestic financial system and support market stability.
However, several members of COPF questioned whether the move could produce unintended consequences.
Lawmakers warned that forcing exporters to convert foreign earnings more quickly could weaken investor confidence and potentially increase volatility in the foreign exchange market. Businesses operating in international markets often rely on foreign currency balances to manage payments, hedge risks and navigate fluctuating exchange rates. A shortened conversion window, they argued, may reduce operational flexibility and create uncertainty among exporters.
In response, Central Bank representatives emphasized that the measure is intended as a temporary intervention rather than a permanent policy shift. Officials assured the Committee that the restrictions would be eased once conditions in the foreign exchange market improve and liquidity pressures subside.
Beyond the export proceeds regulations, COPF also turned its attention to another issue attracting public interest the alleged financial fraud linked to NDB Bank.
Committee members reviewed technical aspects of the case, including the Central Bank’s regulatory responsibilities and oversight role. While details of the investigation remain under examination, lawmakers agreed that further discussion would be postponed until the completion of an ongoing forensic audit.
The decision signals that Parliament intends to maintain close oversight of both the banking sector and the country’s evolving foreign exchange framework.
The latest deliberations highlight the difficult balancing act confronting policymakers. On one hand, authorities are attempting to strengthen foreign exchange reserves and manage liquidity challenges. On the other, they must avoid policies that could discourage exporters, unsettle markets or weaken confidence in the regulatory environment.
As Sri Lanka continues its economic recovery, the effectiveness of these temporary controls—and their eventual withdrawal will likely be watched closely by exporters, investors and financial markets alike.