Author: TELO Admin

Zahran’s wife had confessed that her husband had met the intelligence officers several times prior to Easter Sunday attacks, SJB MP Harin Fernando told Parliament today.

Whilst making this disclosure, MP Fernando requested the Public Security Minister to table a copy of the statements given by Zahran’s wife to Parliament.

“We don’t know whether Zahran’s wife is alive or not, but we request Minister Sarath Weerasekera to table the statement given to police by her in Parliament. We have evidence to prove that Zahran met intelligence officers prior to April 21 suicide attacks. Zaharan’s wife had confirmed this in her statement,” the MP said.

Also he alleged that two lorries which were stopped by the police at Gelanigama exit point at Southern expressway have been released upon the orders of a certain high ranking police officer. “This police officer has been in a popular ‘Malu Malu’ resort on April 21. Eye Witnesses have revealed these information about these lorries even to Cardinal Malcolm Ranjith,” MP also said.

MP Manusha Nanayakkara who came out with more information said the two lorries which were apprehended contained explosives. “The high ranking police officer had accepted a monetary bribe with a five thousand rupee note. Is this high ranking police officer included in the team of police officers who met the Mahanayaka Theras and requested them to talk on behalf of them?” Mr. Nanayakkara questioned.

Showery condition is expected to enhance further in North-western, Western, Sabaragamuwa and Northern provinces and in Galle Matara, Kandy and Nuwara-Eliya districts today and tomorrow (09), due to influence of the prevailing wind convergence zone in the vicinity of the island.

Issuing a ‘Red Alert’ for heavy rain, the Meteorology Department said that very heavy showers above 150 mm can be expected at some places in Northwestern, Western and Sabaragamuwa provinces and in Kandy and Nuwara-Eliya districts.

Heavy showers about 100 mm can be expected at some places in Northern Province and in Matale, Galle and Matara districts during next 24 hours, it said.

General public is requested to take adequate precautions to minimize damages caused by temporary localized strong winds and lightning during thundershowers.

Sri Lanka’s central bank has defended new exporter dollar surrender requirements, which applies to both merchandise and services exports, imposed after money printing created forex shortages.

The new rules which allows for deductions, represent a relaxation for exporters with large import content, the central bank said.

“The residual after the utilisation of export proceeds as above will have to be converted into Sri Lanka Rupees,” the monetary authority said.

“This method, followed by several other countries, ensures that exports with a large import content are not penalised, while enabling exports with a higher domestic value addition to convert a greater percentage of proceeds, after meeting foreign currency financial obligations of such enterprises.”

Analysts had warned that then the official 203 to the US dollar is on the weak side, surrender requirements inject new money, further loosening the credit system, which is already bleeding dollars due to liquidity injections and low rates out of line with domestic credit developments.

However the central bank has been re-selling dollars to importers.

There have been also concerns that export revenues would also be diverted to unofficial channels, like remittances were diverted.

Exporters of services would find it even more easier to divert earnings and price service at or below cost, analysts say.

The full statement is reproduced below.

08 November2021
Communications Department

New rules to convert export proceeds will result in multiple benefits to the country and have no impact on inward remittances by Sri Lankans working abroad.

Sri Lanka has embarked on a focused path towards ensuring macro-economic and financial system stability, having faced strong headwinds from the COVID-19 pandemic.

The pandemic resulted in a substantial loss of foreign exchange revenues to the country, but unprecedented support provided by the Government and the Central Bank of Sri Lanka (CBSL), from fiscal, monetary and public health aspects, has helped a strong rebound of the economy as well as a considerable recovery in some foreign exchange earning sectors.

The tourism sector is also expected to display a notable recovery in the period ahead, and concerted efforts are taken to improve worker remittance inflows through formal channels.

Recent tensions in the forex market have also highlighted the need for Sri Lanka to increase its reliance on foreign exchange earnings over time to strengthen the economy, rather than increasing its foreign borrowings which exposes the economy to various types of shocks.

In this context, in February 2021, the CBSL issued Rules under the provisions of the Monetary Law Act to reinforce the prevailing repatriation requirement on proceeds of merchandise exports and ensure the conversion of a given share of such proceeds within a specific period of time.

These Rules that had been based on similar rules of neighbouring countries, had been fine-tuned from time to time upon requests made by the business community, while those have also helped to ease foreign exchange liquidity issues faced by the domestic market to some extent, with a gradual improvement in repatriation and conversion of export proceeds.

In addition, with mandatory sales of export proceeds converted under the aforesaid Rules by licensed banks, the CBSL has been able to purchase a reasonable quantum of forex from the market thus far during the year, which the CBSL has utilised to part-finance the import of essential commodities to the country during the past few weeks.

Under the new Rules issued on 28 October 2021, the minimum mandatory conversion rate of 25 percent has been relaxed, and instead, exporters have provided with the opportunity to utilise export proceeds for:

a) outward remittances in respect of current transactions;

b) withdrawal in foreign currency notes, as permitted;

c) debt servicing expenses and repayment of foreign currency loans;

d) purchases of goods and obtaining services including one-month commitments; and

e) payments in respect of making investments in Sri Lanka Development Bonds (SLDBs) in foreign currency up to ten per cent of the export proceeds, so received.

The residual after the utilisation of export proceeds as above will have to be converted into Sri Lanka Rupees. This method, followed by several other countries, ensures that exports with a large import content are not penalised, while enabling exports with a higher domestic value addition to convert a greater percentage of proceeds, after meeting foreign currency financial obligations of such enterprises.

In addition, considering the importance of the growing services export sector and the concessions provided to such sectors over time to expand their activities by the Government, the Rules have been extended to services exports as well.

This coverage has been defined in the Rules as payments received in foreign exchange by a person resident in Sri Lanka for services (including professional, vocational, occupational, or business services) provided to a person resident outside Sri Lanka. Accordingly, remittances by Sri Lankan expatriates, which are not considered as services exports, will not be subjected to these Rules.

The implementation of the new Rules, which treat merchandise exports and services exports equally, is expected to provide greater foreign currency liquidity to the domestic market, ensuring the availability of foreign exchange for essential payments at a reasonable exchange rate by Sri Lankans, including the purchase of imported goods, overseas education, foreign travel and health expenses, etc.

In addition, the Rules will enable the identification of the true “value addition” of each export sector of the economy, through the different ratios of conversion as reported by banks.

Exporters enjoy various tax concessions and other advantages provided by the Government in recognition of the net foreign exchange inflow to the country through their operations, and in consideration of the benefits accruing to the country when such proceeds are converted into Sri Lanka Rupees.

Realisation of these anticipated outcomes will therefore enable the Government to continue the provision of concessions to such sectors.

Full repatriation of foreign exchange earnings and improved conversion will also help ensure the stability of the exchange rate and support the stability of the macro-economy and the financial system.

Foreign exchange reserves were measured at US$ 2,267.5 million by the end of October, down from US$ 2,704.2 million in September as the Central Bank settled US$ 492.9 million worth foreign liabilities during the month. Sri Lanka is scrambling to shore up its reserves amid slowdown in inflows due to the pandemic and rating downgrades.

The October reserves touched a fresh post-war low, sufficient for only 1.8 months of imports. But, Sri Lanka has US$ 1.5 billion equivalent swap line signed with People’s Bank of China earlier in the year, which is kept as a stand by support.

The Central Bank recently tightened the foreign exchange conversion rule on both goods and service exporters to rebuild reserves from non-debt creating inflows. Exports have been on an upward momentum since June, generating over a billion dollars or close to that during last four months.

However, the remittance income, which grew constantly fell out of favour since around the same time due to the foreign exchange crunch, which gave rise to several parallel exchange rates in the unofficial channels, prompting action by the authorities to bring the situation under control and thereby re-channel remittances through the official modes.

Meanwhile, increased tourist arrivals in the months of September and October after the easing of virus related restrictions have rekindled hopes for the faster recovery in the US$ 4.5 billion tourism industry, which has the potential to alleviate much of the pressure in the country’s foreign exchange sector.

The Central Bank in early October announced a slew of short term inflows for the next six months, amounting to roughly US$ 10 billion through March next year to ride through the most challenging period of foreign exchange and economic conditions, predominantly pandemic generated. However, Moody’s Investors Service on October 28 further downgraded the country’s sovereign rating to Caa2 from Caa1 citing dwindling reserves and the expanding budget deficit as they grew skeptical over the ability realise the announced inflows.

Sri Lanka’s attempts to generate foreign income out of full or partial sale of State assets have also mired in controversy due to lack of transparency. The proposed partial sale of the coal power plant, Yugadhanawi is a case in point.

While in the first six months, Sri Lanka having received US$ 398 million worth foreign direct investments, the Board of Investment is confident of ending the year with at least US$ 900 million and over a billion dollars in direct investments in 2022.

During the three months from October through December, the country has foreign currency commitments of US$ 553.9 million. During 2022, it has foreign currency commitments of US$ 5,674.3 million, which includes two international sovereign bond settlements of US$ 500 million and US$ 1 billion falling due in January and July respectively.