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Foreign workers forced to convert 100% earnings?

12 Dec 2021

By Imesh Ranasinghe  Sri Lankans earning a foreign salary are forced to convert 100% of their earnings, while the banks are under pressure by the Central Bank of Sri Lanka (CBSL) to ensure such conversions, The Sunday Morning Business learns. Speaking to us, a service exporter who works for a US company said that his bank has asked him to convert his new earnings by the seventh of the following month, without releasing it to him. The service exporter said when his salary was credited on 1 November, it was put on hold immediately, but he managed to get it released by 3 November after speaking to the bank. “When I called the bank, they had no idea about what was happening; they said they had to hold it based on a gazette issued by the Government,” he added. However, he said, by the end of November, when he had called his bank once more to inform them not to hold his salary, the bank had told him that his salary was mistakenly released earlier, and that they weren’t supposed to release it. He said similar incidents were experienced by a few others as well in the first two weeks after a gazette was issued in October, and that the banks were struggling to figure out what said gazette specified. The bank had informed him that since he is living in Sri Lanka, he has to convert his earnings to rupees, and that the entire amount should be converted by the seventh of next month. “The salaries of people who earn money doing a genuine job should not suddenly be put on hold. Even the banks were confused because it doesn’t seem like a sane thing to do; you don’t hold a person’s salary,” he said. Moreover, he said that foreign exchange earnings should not be put directly into a rupee account, as the banks will convert it at the rate they want. “You can keep your US dollars for your future requirements for up to a month. Many aren’t aware of this, and the banks, at times, make fools out of you if you are not well informed of the gazette,” another service exporter said. Officials at the CBSL told us that the idea behind the latest gazette issued on foreign exchange conversion was to convert the export proceeds that are received in a calendar month before the seventh of the following month. However, the CBSL has been issuing similar gazettes since February 2021 on the conversion of export proceedings, where percentages were stipulated on the amounts that should be retained and converted. However, the gazette issued in October removed those percentages and gave a list of permissible expenses for which exporters could retain their export proceedings while converting the rest to rupees. Earlier, gazettes only included production exporters, but the gazette issued in October included the guidelines for export services as well. The list mentioned by the gazette included the following: outward remittances in respect of current transactions of the exporter of goods and services; withdrawal in foreign currency notes or transfer of funds for travel purposes of the exporter of goods and services; debt servicing expenses and repayment of foreign currency loans; payments for purchases of goods and obtaining services by the exporter related to such export of goods and services, including one-month commitments in foreign currency; and payments in respect of making investments in Sri Lanka development bonds in foreign currency up to 10% of the export proceeds, so received. According to the CBSL official, 100% of the salaries earned by freelancers and others for their services provided to foreign companies should be converted, as there is no reason for them to retain it. “The issue is the banks are held responsible, because, according to said gazette, the banks are supposed to ensure that these conversions are happening,” a banker told us. The official said that the banks have to cover themselves first, as the CBSL can easily come after the banks, which is the reason why the banks are under so much pressure. “The freelancers who are getting paid for their services in foreign exchange are liable to convert them (earnings) 100%, as they cannot claim expenses,” the banker said. However, the official pointed out that the foreign exchange that has been accumulated over a period of time did not have to be converted; rather, only the amount received after the regulation date. On 7 December, in a tweet, CBSL Governor Ajith Nivard Cabraal stated that social media reports claiming that funds in non-resident foreign currency (NRFC) accounts will be converted to rupees at midnight that night, were completely false.


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