Central Bank introduces urgent measures to ease pressure on exchange rate, prevent market panic

• All types of vehicle importation suspended for 3 months
• Importation of non-essential goods suspended 
• Prohibits local banks to purchase ISBs
• Limits foreign travel allowance up to maximum of US$ 5, 000

The Central Bank yesterday introduced urgent measures to ease pressure on exchange rate and prevent financial market panic due to the COVID-19 pandemic.
The three key measures included: 1) the suspension of importation of all types of motor vehicles other than those excluded specifically under Banking Act Directions No.01 of 2020, under letters of credit; 2) suspension of facilitating importation of non-essential goods specified in Banking Act Directions No.01 of 2020, under letters of credit, documents against acceptance and advance payment and 3) suspension of the purchase of Sri Lanka international sovereign bonds (ISBs) by licensed banks in Sri Lanka. 

The Central Bank said licensed commercial banks and National Savings Bank (NSB) are directed to adopt the above measures during the next three months, with immediate effect. The Central Bank said measures were taken as per the provisions of the Monetary Law Act No. 58 of 1949, the Banking Act No. 30 of 1988, and the Foreign Exchange Act No. 12 of 2017.

In addition, the Central Bank said authorized dealers of foreign exchange are only allowed to issue foreign currency notes as travel allowance up to a maximum of US$ 5,000 or its equivalent in other foreign currency. 

“The Central Bank will continue to monitor market developments and take further measures as required, while ensuring adequate liquidity in the market in order to facilitate smooth operations and sustain market confidence amidst the COVID-19 outbreak,” a Central Bank statement said.

The Sri Lankan rupee has depreciated significantly this week against the US dollar with the selling rate of a dollar being recorded at Rs.188.20 as of yesterday.