Financial Times

10 percent of export proceeds not repatriated
The Central Bank has announced a new export proceeds monitoring scheme from January after estimates that some 10-12 percent of export earnings are not brought back to the island at a time when the government is trying hard to shore up its foreign exchange reserves.

The export proceeds monitoring mechanism that will gather data on a quarterly basis will improve the foreign exchange management system, the bank has told exporters.

"This information will help us improve our compilation of balance of payments statistics and analyse external developments relating to the performance of Sri Lankan exports," Controller of Exchange H.A. G. Hettiarachchi said.

He stressed that the reporting scheme was launched purely to collect more accurate data on export proceeds to compile balance of payments statistics. "There's no intention of altering existing provisions for exporters under the Exchange Control Act," he said. The monitoring scheme had been discussed with the Exporters Association of Sri Lanka which had pledged its fullest co-operation to implement it, he added.

Till now the Central Bank has been compiling balance of payment statistics based on Customs data on exports after reconciling them with the inflow of funds through commercial banks on such exports.

After exchange controls were liberalized in 1994 exporters were allowed to retain their export proceeds either in a dollar or rupee bank account in Sri Lanka or a bank account abroad. Previously, they were required to repatriate export proceeds within 180 days.

The Central Bank estimates that exporters have not been repatriating around 10-12 percent of export proceeds annually over the last 10 years. Board of Investment chairman Saliya Wickramasuriya recently said this amounts to around $6 billion, or three times the current foreign reserves.

Some exporters used to negotiate their export proceeds directly with their buyers without going through banks for purposes of cost-effectiveness and urgency of supplies to avoid delays such as those caused by bank holidays.

Hettiarachchi said they decided to start collecting information on export proceeds directly from individual exporters because of difficulties in ascertaining export proceeds received through banking channels owing to identification problems.

Under the scheme exporters must report their export proceeds with effect from January 3, 2005 on their exports for the third quarter of 2004. The time lag is because it takes at least 120 days to get export proceeds after making shipments.

Exporters must inform the values of exports declared by them to customs, provide information on the amount repatriated, amount retained abroad for their payment of overseas expenses and amount so far used for such expenses out of foreign retentions and details of short shipments and defaults by foreign buyers.

Back to Business