CB sets record straight on forex conversions

• Says worker remittances are not subjected to mandatory conversions 
• But earnings from services exports including professional services must be dealt with according to conversion rules 
• Licensed banks strongly advised to strictly adhere to the rules 
•  Warns stern legal actions against those who send and receive funds via illegal means

The Central Bank set the record straight on the repatriation and conversion of foreign exchange earnings as accusations poured through last week against licensed banks for forcibly converting foreign exchange earnings repatriated by migrants and those who receive income in dollars.

In a statement issued during the weekend, the Central Bank said, “ rules on conversion of export proceeds do not apply to workers’ remittances,” but the foreign exchange received by resident Sri Lankans for providing services including but not limited to tourism, professional services to non residents all of which were identified as, ‘services exports’, become subjected to rules governing the conversion of exports proceeds issued on October 28 last year.

According to the set rules, the proceeds from services exports and merchandise exports are mandatorily required to be converted into Sri Lankan rupees after adjusting for permitted deductions, including the commitments up to a month. 

What made the issue to return to the fore was a claim made by the Central Bank Governor, Ajith Nivard Cabraal last week who categorically denied claims of forcible conversions. 

It soon sparked a social media firestorm as many parties who became victim of forcible conversions of their worker remittances and other dollar incomes took to social media to express their outrage as the reality deferred from what the Governor claimed. 

However, the claims made by these victims made clear that the rules had indeed created some confusion among banks as well as clients when interpreting them. 

Hence, the Central Bank made it clear last week that banks must not deviate from the letter of the rules and to make their clients aware of them when they deal with them. 

“Licenced banks are also advised to strictly adhere to the rules stipulated by the CBSL with regard to the conversion of foreign exchange proceeds of customers, and apprise their customers about such rules, so as to avoid any misunderstanding,” the Central Bank said in a statement.

Meanwhile, the regulator also cautioned against those who use illegal channels to send and receive foreign currency, as such parties would be dealt with stern legal action as previously announced. 

“Accordingly, the general public is requested to remain vigilant and not be misled by false information and promises,” the Central Bank added.