Exporters request relief from mandatory conversion rule

• Proposes quarterly conversion with more market flexibility

The export sector is lobbying for relief from the mandatory conversion rule of the Central Bank by proposing quarterly conversion with more market flexibility.

Exporters are of the view that the current practice of converting the total residual balances on the seventh day of each month as directed by the CBSL is unfair and affects the cash flow as the industry is challenged on many fronts.

It was noted that technically exporters are being kept away from the free market as they are tied down to the banks and forced on conversion without allowing them a greater free hand and flexibility to negotiate and book forward rates in a volatile exchange market. Exporters told the Daily FT that that importers have an advantage as they can book as they wish by monitoring the current volatile market and work with different banks, whereas exporters have to cash the proceeds on a given date, which gives the banks further advantage not to offer the best rupee rates as we are a captive market for them due to the regulations on cashing on a given date.

The CBSL itself too has the same advantage as export proceeds are captive. We are also not allowed to transfer our foreign money to different local banks, so that we could negotiate competitive rates when cashing and allow the market to decide, they pointed out.

Given the volatility of the exchange market, exporters now need more flexibility in the foreign currency they earn and bring into Sri Lanka. This will help establish a more competitive exchange regime to manage the cash floor, input inventory etc., exporters pointed out.

“We request the Central Bank Governor Dr. Nandalal Weerasinghe to relax the current process as he has done in many other areas to facilitate trade/services and the changing environment with import restrictions being released,” exporters said. “We propose that the current window for converting on the 7th day of the month be extended to a quarterly conversion which would help us to control our funds and the cash flow management,” they added.

It was also pointed out that the current low demand for exports in the global market is also affecting us badly and we need sudden funds for our operations when orders are placed by our buyers as they too now are closely controlling inventory and cash flow.