Govt. expands limits on forex outflows by 6 months

• New restrictions on outward remittances on capital transactions introduced by Finance Ministry and Central Bank

The Central Bank yesterday said the Government has expanded measures introduced earlier this year to limit outflow of foreign currency by six more months, including restrictions on outward remittances on capital transactions as well as migrant allowances.

With a view to preserve the foreign currency reserve position of the country and considering the possible negative impact to the economy due to the outbreak of the COVID-19 pandemic, Finance, Economic and Policy Development Minister Mahinda Rajapaksa with the recommendation of the Monetary Board of the Central Bank and the approval of the Cabinet of Ministers has issued an Order introducing the following measures on outward remittances on capital transactions for a period of six months effective from 2 July.

Gross official reserves stood at $ 6.5 billion at end May 2020, equivalent to 4.2 months of imports. In March reserves were at $ 7.5 billion, equivalent to 4.6 months of imports. 

The regulatory changes given below were released in a statement by the Central Bank. 

1. Suspend the general permission granted to make outward remittances for investments overseas through the outward investment accounts by persons resident in Sri Lanka excluding the following;

a. investments to be financed out of foreign currency loans obtained by the investor from a person resident outside Sri Lanka under the provisions of the Foreign Exchange Act, 

b. an additional investment to be made to fulfil the regulatory requirement in the investee’s country applicable on the investment already made in a company or a branch office in that country,

c. an additional investment/infusion of funds to be made by eligible resident companies in already established subsidiaries or branch offices in overseas up to a maximum of $20,000, for the purpose of working capital requirements of the investee,

d. the remittances up to a maximum of $20,000, for the purpose of maintenance of liaison, marketing, agency, project, representative or any other similar offices already established in overseas.

2. Suspend the outward remittances through Business Foreign Currency Accounts (BFCAs) or Personal Foreign Currency Accounts (PFCAs) held by persons resident in Sri Lanka, other than for the remittances on current transactions up to any amount or capital transactions up to a maximum of $ 20,000.

3. Limit the eligible migration allowance for the emigrants who are claiming the migration allowance for the first time, up to a maximum of $30,000.

4. Limit the repatriation of funds under the migration allowance by the emigrants who have already claimed migration allowance up to a maximum of $20,000.

5. Limit the authority of the Monetary Board of the Central Bank of Sri Lanka to grant special permission for investments on case by case basis, which exceeds the limits specified in the general permission, only to those satisfying the criteria mentioned in 1.a and 1.b above.

The above restrictions are only applicable to the identified capital transactions and do not impose any restrictions on already permitted current transactions.

The said Order published in the Extraordinary Gazette No. 2182/37 dated 2 July containing exact details can be accessed through ‘Downloads’ in the official website of the Department of Foreign Exchange (www.dfe.lk).