Measures in sight to control informal transfers of foreign exchange reserves out of SL – The Island

By Hiran H. Senewiratne

The government will publish a special notification in the Official Gazette to prevent and control informal transfers of foreign exchange reserves out of the country, Central Bank Governor Dr. Nandalal Weerasinghe said.

“At present, many people transfer US dollars and other foreign currencies through informal systems, such as the Undial and Hawala methods, which withdraw large amounts of foreign exchange reserves from the country. With the introduction of a new gazette notification, money/funds could only be transferred through banks. If bank details cannot be proven, these imported items would be confiscated by authorities, the governor said.

“The Department of Import and Export Control has been empowered by law to issue such gazette notifications to prevent and control such informal money transfers out of the country. This would allow the rupee to stabilize against the dollar, Dr Weerasinghe told a press conference at the Central Bank Auditorium yesterday.

Weerasinghe added: “The measures include introducing regulations to encourage dollar flows currently traded in the informal market to be routed through the formal banking system. In my view, import spending will continue to decline to more sustainable levels with this new Official Journal notification.

“While external debt restructuring remains a top priority for the Sri Lankan government, domestic debt in the form of government securities and Sri Lanka Development Bonds will not be restructured.

“Negotiations with the IMF and the implementation of sustainable economic policy reforms remain top priorities.

“IMF action will continue regardless of the political landscape and all creditors will be treated equally in the debt restructuring process. Private sector assistance is requested to successfully implement economic stabilization measures.

“There is a need to strengthen the social safety net with the rising cost of living. To this end, multilateral agencies, such as the World Bank, will seek to reallocate funds committed to projects, to help vulnerable segments of the population.

“Encouraging progress has been made towards establishing a macro-fiscal policy framework and initiating structural reforms. A staff-level agreement with the IMF is expected to be concluded within the next two months.

“Additional measures will be implemented to address pressing economic concerns.”