Sri Lanka Central Bank has been called upon to make public the actions taken by them against exporters, companies and individuals who do not comply with all regulations on foreign exchange transactions, United Federation of Labour (UFL) disclosed.
The country’s monetary authority has so far failed to reveal up-to-date details of measures and the current progress of its initiatives it has taken for non-compliance of its regulations on foreign exchange transactions including repatriation of export proceeds.
The Central Bank has intensified its monitoring on compliance with the relevant requirements with respect to exporters and Authorised Dealers , but its out come was not in the public domain, UFL claimed
The UFL demanded CBSL to take action against non-compliance by directly enabling the Foreign Exchange Department of CBSL to access offshore accounts of the exporters and repatriate export incomes held outside the domestic banking system.
They further urge the CBSL to take action against offending Companies and hold them accountable under the law for flouting CBSL regulations which has threatened the economic sovereignty of Sri Lanka.
According to the information reported by banks, during the first six months of year 2022, a total of US$ 1,533 mn has been received as service exports receipts, of which $ 406 mn has been converted to Sri Lankan Rupees.
The highest monthly service export proceeds of $ 324 mn were received in March 2022. During discussions with representatives of service exporters, they have highlighted the potential to further enhance export receipts
The UFL said the Section 9 (2) of the Monetary Law Act of 1949 (as amended) gives the Monetary Board of the CBSL expansive powers which includes directly accessing offshore accounts and enforcing repatriation of residual incomes of exporters who violated repatriation requirements.
Foreign exchange liquidity shortage in the domestic financial system has led to a crippling scarcity of imported essentials like fuel, medicine, food and fertiliser, stoking inflation of nearly 70% and food inflation of 95% by September this year.
The unavailability of foreign exchange is shrinking production; Sri Lanka’s Industrial Production Index collapsed 14.3% by August 2022.
It is leading to rising unemployment hand in hand with hyperinflation, a situation which economists call stagflation.
Despite the fact that foreign exchange needed to secure essential supply of imports and reduce living costs is critically low, Sri Lanka recorded its highest ever merchandise export income of $ 8.9 billion in Jan-Aug 2022.
Furthermore, foreign debt servicing costs declined sharply following the sovereign default in April this year. Against this backdrop, a trade surplus of $ 21 million in June 2022 was also recorded.
Including the services exports income of approximately $ 2 billion and $ 2.2 billion inflow of workers’ remittances the total non-debt foreign exchange availability of Sri Lanka amounts to nearly $ 13.1 billion against the lower total import bill of $ 12.8 billion in Jan-Aug 2022. Sri Lanka also received a $ 4.2 billion emergency credit line from India during the period.
Nevertheless, CBSL’s foreign exchange reserves diminished to $380 million by September 2022 excluding the $ 1.4 billion Chinese swap facility that is subject to conditionalities on usability.
The domestic financial system is therefore facing the worst foreign exchange shortage since independence while export incomes are the highest in history alongside minimal foreign debt servicing costs.
