Expeditious arrangements to commence external debt restructuring process -CBSL
Sri Lanka is to bring down the foreign currency note holdings of the public to USD 10,000 from USD 15,000, and will crackdown on anyone holding foreign currency notes for over three months. Accordingly, holders of currency notes will be given a grace period of two weeks and within that period, they are expected to deposit the money in the banking system.
“Currency holders are able to deposit money in foregn currency accounts in the banking system or convert that into rupee and keep that in rupee accounts.” Central Bank Governor Dr. Nandalal Weerasinghe told the Monetary Policy press briefing held at the CBSL yesterday (19). Under Sri Lanka’s foreign exchange law, it is illegal to hold more than USD 15,000 worth of foreign currency by Sri Lankan citizens. “We have observed that people tend to keep foreign currency at home in the recent past because of the grey market premiums.”
He also mentioned that there is a positive development in the foreign exchange market mainly due to certain guidelines issued by the CBSL.
Technical level discussions with the International Monetary Board are currently underway and expeditious arrangements are being made to commence the external debt restructuring process.
“Market is responding well.Bankers , exporters as well as importers are following the guidelines. As a result ,black market premium has come down significantly.”
In addition Dr.Nandalal said, the CBSL has introduced a letter of credit margin requirement, under which non-essential item importers are required to put money in advance to open LCs. Speaking further, the CBSL Governor stressed the need to stabilize interest rates and emphasised that certain interventions will be made in this regard.
“We have given some guidance on exchange rate and it has worked really well. Similarly, we would intend to have a similar kind of arrangement to give some guidance to address the situation.”
According to the CBSL, inflation is also projected to remain elevated in the coming months before moderating thereafter supported by the realisation of the full impact of the policy measures.
Substantial policy measures implemented by the board combined with other measures to stem the firming up of aggregated demand pressures are expected to contain any further build up of inflation expectations and ease inflationary pressures in the period ahead.
Speaking further Dr.Nandalal said that technical level discussions with the international Monetary Board are currently underway and expeditious arrangements are being made to commence the external debt restructuring process.
According to the CBSL, negotiations have already begun with bilateral and multilateral partners to obtain bridging finance to ensure essential imports are available in the country and to continue social safety net programmes.