CBSL regulation permits outward remittances up to $ 20,000
Banks make their own rules
By Shenal FernandoMany foreign expatriates in Sri Lanka are complaining that they are not permitted to repatriate funds by their respective licensed commercial banks (LCBs) in the island for personal purposes, in the midst of a severe foreign exchange crisis. Expatriates were complaining on social media for not being able to transfer funds to countries including India and the UK. One expatriate stated: “We urgently need to transfer LKR into pounds and take pounds back home to the UK with us but being told that we cannot get any money out of the country yet. We are returning to live in the UK but cannot take any assets with us.” Another individual stated : “You cannot send money out of Sri Lanka. Only can get them into Sri Lanka. They have had all these changes because of the current situation of the country.” The Department of Foreign Exchange of the Central Bank of Sri Lanka (CBSL) in a press release dated 2 July 2021 restricted outward remittances on capital transactions through business foreign currency accounts and/or personal foreign currency accounts held by a person resident in Sri Lanka, up to a maximum of $ 20,000 or equivalent amount in any other designated foreign currency during the six-month period commencing from 2 July 2021. However, it now appears that certain LCBs have taken individual decisions to not permit outward remittances on capital transactions even below the CBSL-mandated $ 20,000 or equivalent amount in any other designated foreign currency, due to depleting foreign exchange reserves at banks.Continued attempts made by The Morning Business to determine the reason behind this issue proved futile as Central Bank of Sri Lanka (CBSL) officials and Governor Ajith Nivard Cabraal were unreachable throughout the day, yesterday (21). According to the CBSL, the cap on outward remittances were imposed for the purpose of maintaining financial system stability by minimising the pressures on the exchange rate and preserving the foreign currency reserve position of the country. The official gross foreign reserves in Sri Lanka fell to around $ 2.8 billion in July 2021, its lowest position since July 2009 due to the settlement of the matured international sovereign bonds (ISBs) of $ 1.0 billion by the CBSL on behalf of the Government. However, the foreign reserves were strengthened in August 2021 to $ 3.5 billion, due to the influx of $ 787 million from the International Monetary Fund’s (IMF) special drawing rights (SDR) allocation and $ 150 million from the Bangladesh Central Bank under a swap agreement the CBSL has entered into with them. Nevertheless, the foreign reserve position of the country is expected to weaken further, with the calculated pre-determined drains on reserves for foreign debt payment over the next 12 months estimated at $ 6.9 billion. Moreover, within the next two to three months alone, $ 1.5 billion in foreign debt needs to be repaid, reducing reserves to $ 2 billion. Similarly, the Sri Lankan rupee has depreciated by around 8.6% over the last 12 months reaching an all-time low on 31 August, selling at Rs. 204.89 against the US dollar, before settling at around Rs. 203.00. Therefore, these pressures would point to the further extension of such restrictions on outward remittance on the capital transactions and the introduction of further additional restrictions. However, as of right now, while the CBSL has imposed restrictions on the outward remittance of capital transactions by foreign expatriates, it is yet to impose any restrictions on the outward remittance of their income or savings. Despite this, it appears that local banks have, considering their own precarious foreign exchange positions, enforced regulations restricting all outward payments, with priority assigned on a case-to-case basis, consequentially denying many foreign expatriates the right to repatriate their personal funds.
