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Sri Lanka tightens trade rules to increase foreign exchange reserves

FILE PHOTO: People walk past the main entrance of the Central Bank of Sri Lanka in Colombo, Sri Lanka
FILE PHOTO: People walk past the main entrance of the Central Bank of Sri Lanka in Colombo, Sri Lanka March 24, 2017. REUTERS/Dinuka Liyanawatte/File Photo

March 12, 2022

By Uditha Jayasinghe

COLOMBO (Reuters) – Sri Lanka’s central bank tightened trade restrictions on Saturday, ordering exporters to repatriate foreign exchange earnings within 180 days of transactions in a bid to bolster the country’s depleted foreign exchange reserves.

Sri Lanka is navigating its worst financial crisis in over a decade, struggling to pay for critical imports like fuel, food and medicines, and doing so with just $2.31 billion in reserves.

The bank’s measures include mandatory currency conversion for exporters of goods and services to convert their foreign exchange earnings into Sri Lankan rupees.

“All licensed banks are required to closely monitor incoming goods into Sri Lanka,” the central bank said in a statement, adding that it “has the right to take action against non-compliance by exporters or licensed banks.”

The state-owned oil company hiked prices on most fuels by 55 to 95 rupees (22-24 cents) a liter on Friday to offset losses after Sri Lanka introduced a floating exchange rate that saw the rupee 30% lower at 260 rupees to the dollar dropped .

($1 = 250,0000 Sri Lanka Rupees)

(Reporting by Uditha Jayasinghe; Editing by Rupam Jain, Stephen Coates and William Mallard)

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DUSTIN JONES

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