The Central Bank is to take immediate action to prohibit inward and outward remittances from unauthorised channels such as Undial and Hawala, directing all those transactions via the local banking system The modalities of the new system will be devised by the Finance Ministry and Import and Export Control Department and the relevant circular and [...]

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CB takes action to prohibit remittances from unauthorised channels

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The Central Bank is to take immediate action to prohibit inward and outward remittances from unauthorised channels such as Undial and Hawala, directing all those transactions via the local banking system

The modalities of the new system will be devised by the Finance Ministry and Import and Export Control Department and the relevant circular and the gazette notification will be issued soon, Central Bank Governor Dr. Nandalal Weerasinghe said at a media conference on Friday.

Importers will have to buy dollars from the banking system for opening LCs and making payments for imports under the new system, he said adding that this is the aim of increasing the dollar reserves in banks to release only for the essential commodity imports such as fuel, medicine and food.

Dollar facilities will be given to parents to send children for overseas education and import medicine to treat patients in local hospitals.

Measures will be taken to make it compulsory for Sri Lankans working overseas to send their foreign remittances via local banking systems and using unauthorised channels will be prohibited, he disclosed.

Outward remittances through Business Foreign Currency Accounts or Personal Foreign Currency Accounts held by persons resident in the country will also be suspended.

Sri Lanka is seeking about US$3 billion in bridge financing. In addition to the World Bank pledge of $600 million, India has committed $1.9 billion and is in talks for an additional $1.5 billion in credit for fuel and other essential imports.

Referring to the current foreign exchange position, Dr. Weerasinghe disclosed that there was a balance $750 million from an Indian Credit line and another $ 300 million from other sources.

He noted that the technical discussions are now underway with the IMF for an Extended Fund Facility (EFF) and their team will arrive in the island for further talks if everything goes on schedule, and this process of obtaining the EFF could be finalised within three months.

External debt restructuring remains a top priority at present and the selection of financial and legal advisors is underway, he added

Dr. Weerasinghe noted that satisfactory progress has been made towards establishing a macro-fiscal policy framework and initiating structural reforms. He expressed confidence that a staff-level agreement with the IMF is likely to be reached within the next two months.

The Governor also stressed the need to strengthen the social safety net with the rising cost of living. To this effect, multilateral agencies such as the World Bank will be looking to reallocate funds committed for projects towards assisting vulnerable segments of the population, he added.

He noted that IMF negotiations will continue irrespective of the political situation and all creditors will be treated equally in the debt restructuring process.

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