Exchange Control regulations to be abolished
Sri Lanka has removed most of the Exchange Control regulations that
stunted the country's economy and in the next 4-5 years, the remaining
Exchange Control measures will be abolished facilitating business and
trade, said the Deputy Governor of the Central Bank, P. Samarasiri at
the launch of Lanka Money Transfer, a money transfer system of DFCC
He said that Exchange Control originated during the Second World War
as a measure taken by governments to protect foreign exchange in their
However, after the war on terrorism ended, most countries removed
exchange controls and opened their doors to global business and trade.
“But we, in our part of the world, continued with exchange control
and kept our countries out of global business. As a result we have
become low income countries,” he said. Exchange Control was relaxed in
1977 and facilitation of global business began again. Through exchange
control, current account and capital account transactions had been
Current account transactions are now fully liberalised and,
therefore, there is no exchange control related to exports, imports,
services and foreign fund transfers.
Samarasiri said that liberalisation of the capital account was not
done quickly because there was a perception of risk.
Capital account liberalisation allows investment to flow in and out.
It enables foreign investors to bring capital and do businesses.
“Our investors too can invest in foreign countries and earn profits.
Therefore, removing controls on the capital account is beneficial to
the country and the fear and restriction is baseless. In the recent
past, control over capital account transactions too was removed but
there are some controls yet,” Samarasiri said.
Today, the restriction is on Sri Lankan investors and their
investments in real and financial products abroad are under control. The
Government is due to remove these remaining restrictions too in the
coming 4-5 years and make Sri Lanka a global business centre as
envisaged in government policies, he said.
Speaking on Lanka Money Transfer (LMT) remittance system, Samarasiri
said that foreign remittances play a key role in the country's economy.
Professional and non-professional migrant workers send home the money
they earn abroad.
“Since our imports are much higher compared to our exports, Sri Lanka
has a huge trade balance. Foreign remittances cover 75-80 percent of the
deficit. Thanks to migrant workers our official balance of payments is
always in surplus,” he said.
LMT is similar to the Real Time Gross Settlement System (RTGS) of the
Central Bank and with the development of IT, financial transactions and
trade across borders has become much easier.
The Alibaba e-commerce system launched by a rural Chinese teacher and
which made a historic IPO at the New York Stock Exchange is a classic
example. LMT can convert easily to a international fund transfer system
and banks too are exploring the possibility of introducing new products
such as e-commerce solutions, he said.