New export conversion rules to help gauge sectoral net exports

• CB to present country exports net of imports in about three months 

The new rules set out on export proceed conversion, which enables the exporters to meet all imports, which are required to make or facilitate their respective exports, have given rise to an extremely important set of data for the officials to gauge the true value addition of each export commodity or industry net of imports. 

To this end, under the fresh rules in respect of the export proceed conversion, the Central Bank is now able to collect such data from the banks and calculate how much each sector of exports is making in dollar terms net of their imports. According to Central Bank Governor Ajith Nivard Cabraal, such data could be available as early as in three months, so that not only the policymakers but also the respective industries and public will have a clearer idea as to the true value addition of each of the country’s exports, making the decision-making and policymaking much easier and effective. “You see, this is actually a very useful indicator for us because hitherto we have shown exports in total and imports as another total. We never matched the particular import for that particular export,” Cabraal told the media.  

“Now, the current rules that we have set out will match that,” he added. The Central Bank, via an extraordinary gazette on October 28, gave wider flexibility over the use of an exporter’s incomes before they are required to convert any remaining into Sri Lankan rupees, in a bid to increase the dollar liquidity in the domestic foreign exchange market, as part of a slew of other such measures.  

In what is referred to as the export proceed conversion rule, effective from October 28, the exporters are allowed to meet all their foreign currency-denominated expenses and other commitments up to a month, ranging from current transactions to purchasing of goods and services to servicing foreign currency loans to making investments in Sri Lanka Development Bonds up to a limit of 10 percent of proceeds

Although there was some immediate uproar over the new rule by certain unnamed parties in the media, perhaps due to their lack of understanding of the fresh rule, the broader business and exporter community was largely in acceptance of the rule and gave their commitment to comply. 

Although unintended, now these new rules have given an advantage for the data compilers to understand what each of the export sector imports and how much is spent on such imports and thereby identify their net export contribution.  “So, when you say garment exports are US $ 5.0 billion, we will know exactly how much of that US $ 5.0 billion are imports because now they are co-operating; they want all their imports to be paid for, so we are happy to do that because the imports that are actually correspond to that item of export will be known,” Cabraal said elaborating what the new rules do in terms of facilitating new data gathering. “Then we can give a net figure as to what each industry is providing to the overall national inflows (from exports). So, that’s a very good thing,” he added. 

Cabraal said none of the import shipments required for export industries have been allowed to be stranded at the port, due to the dollar shortage, as they have intervened in clearing such containers. 

“Very soon, may be in the next three months, we can provide you with information, how much the actual value addition is from each of those industries, how much are the remittances, how much are the tea, how much are the garments, how much is the rubber, how much is the gems, so that we will be known very clearly,” he said. “Once that is known very clearly, it will be easier for the decision makers; it helps the industry itself and it helps all the stakeholders,” he added.