CB to provide more details on new exchange rate policy, incentive schemes

The Central Bank (CB) is expected to come up with more details on the new exchange rate policy today after deciding to “float” the rupee while issuing a “guidance” to maintain the currency at Rs.230 against the US dollar, according to the Cabinet Co-Spokesperson and Minister of Mass Media Dullas Alahapperuma.

Welcoming the move by the CB to “float” the rupee on late Monday, Alahapperuma said that this would strengthen the economy while easing the prevailing foreign exchange crisis.

Prior to CB’s decision, the Cabinet of Ministers on Monday approved a proposal presented by the Labour Minister Nimal Siripala de Silva to increase the current incentive allowance of Rs.10 per US$ offered to remittance conversions of migrant workers to Rs.38 per US$.

“This is an incentive to bring in more remittances. The Cabinet approved it before CB’s decision to float the exchange rate at Rs.230,” Alahapperuma stressed.
As the CB artificially held the exchange rate at Rs.200-203 range, he acknowledged that migrant workers had moved to unofficial money transfer systems to send their earnings, leading to a sharp drop in worker remittance inflows to the country.

On Monday, the Cabinet of Ministers also approved a proposal presented by Trade Minister Bandula Gunawardane to  pay an incentive of Rs.30 per dollar on export earnings earned over the previous quarter to companies that have achieved at least 10 percent export progress compared to the corresponding quarter of the previous year.

The measure was targeted at increasing the export revenue by an additional US$ 5.5 billion this year.

“An Exporters’ Incentive Scheme is designed to ease the difficulties faced by exporters such as high inflation, severe foreign exchange deficit, restrictions on importing raw materials and high operating costs, and to increase the progress in export performance achieved during last year. 

Implementation of the proposed incentive scheme is expected to generate additional revenue of US$ 5500 million in 2022 over export earnings in 2021,” the Government Information Department elaborated.

Meanwhile, Alahapperuma noted that the CB would clarify the implementation of these proposals along with CB’s new foreign exchange policy.
“The Central Bank will clarify the decisions tomorrow,” he added.