Cabinet gives nod to further relax foreign exchange regulations

15 June 2024 01:16 am Views - 476

By Nuzla Rizkiya 
In a continued effort to facilitate developments in the domestic foreign exchange market, the Cabinet of Ministers approved a new rule issued by the Central Bank to further relax the foreign exchange regulations.  
Effective from June 20, 2024, the new rule, under Clause 22 (1) of Foreign Exchange Act (FEA) No. 12 of 2017, will further release certain suspensions and restrictions to facilitate the expansion of business activities by the resident companies overseas.  
The new regulations will be implemented for a period of six months.  

The Cabinet approval was granted following the resolution furnished by President Ranil Wickremesinghe, in his capacity as the Finance, Economic Stabilisation and National Policies Minister, to implement the recommendations by the Central Bank.  
Since April 2, 2020, the Finance Ministry had issued orders under Section 22 of the FEA to temporarily suspend/limit certain outward remittances, in a bid to minimise the pressure on the exchange rate and preserve the country’s position in foreign currency reserves. 
These orders were issued from time to time continuously, with a validity period of six months.  
However, by 2022, the country spiralled into an economic crisis to grapple with an inflation soaring at 70 percent that effectively dwindled the forex reserve.  
Therefore, in an effort to facilitate international transactions, the Finance Minister in 2023 issued a new order relaxing the foreign exchange rules on the identified transactions.   
This new order relaxed certain limitations on outward remittances for capital transactions and removed the restrictions on the ongoing transfers of emigrants, while continuing other suspensions/limitations, which were imposed under the previous order.