CB shrugs off claims new export conversion rule damages foreign inflows

• Says ability to continue with tax and other concessions on exporters hinges on complying with repatriation and conversion rule

The Central Bank yesterday said the new exports proceeds conversion rule is nothing to be alarmed of, as it provides greater flexibility to the exporters of goods and services to meet all of their foreign currency expenses and other commitments before converting the remaining. 

Assuaging the concerns raised by certain quarters recently on the likely impact on worker remittances, the Central Bank said the new rule has nothing to do with the moneys repatriated by the Sri Lankan migrants, as it is not covered under the services exports as stipulated in the rule. 

In a new rule issued on October 28, which effectively rescinded all other previous rules on the matter, the Central Bank gave much wiggle room for exporters of merchandise goods and services to meet a number of expenses and other commitments in foreign currency before converting them into rupees.

However, that must happen on or before the seventh day of the following month.

“This method, followed by several other countries, ensures that exports with a large import content are not penalised, while enabling exports with a higher domestic value addition to convert a greater percentage of proceeds, after meeting foreign currency financial obligations of such enterprises,” the Central Bank said in a statement yesterday. 

The new rule also did away with the hitherto existed mandatory requirement of minimum conversion requirement rate of 25 percent within 30 days upon the receipt of
exports proceeds.    

The exporters are required to bring down all of their export proceeds within 180 days from the date of shipment or provision of service, a requirement, which
remains unchanged.

In what could also be seen as an attempt to associate the requirement as a reciprocal obligation and the moral duty by exporters who enjoy tax concessions and various other support schemes, the Central Bank reminded them that the ability to continue such support could only be possible if the proceeds are converted into rupees. 

“Exporters enjoy various tax concessions and other advantages provided by the government in recognition of the net foreign exchange inflow to the country through their operations and in consideration of the benefits accruing to the country when such proceeds are converted into Sri Lanka rupees,” the statement said. 

“Realisation of these anticipated outcomes will therefore enable the government to continue the provision of concessions to such sectors,” it added.