The instructions have been issued by the Central Bank of Sri Lanka following a decision taken by the Monetary Board of the Central Bank of Sri Lanka.
The Monetary Board has decided to adopt several policy measures with the view to strengthening macroeconomic stability.
Accordingly, the Monetary Board decided to instruct registered tourist establishments to accept foreign exchange only in respect of services rendered to persons resident outside Sri Lanka.
It has also decided to increase the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 50 basis points each, to 5.50 per cent and 6.50 per cent, respectively.
The Monetary Board has also decided to distribute the financing of essential import bills for fuel purchases among the licensed banks in proportion to their foreign exchange inflows, extend the payment of an additional Rs. 8.00 per US dollar for workers’ remittances paid in addition to the incentive of Rs. 2.00 per US dollar offered under the “Incentive Scheme on Inward Workers’ Remittances” until 30 April 2022, reimburse the transaction cost borne by Sri Lankan migrant workers through the payment of Rs. 1,000 per transaction, when remitting money to rupee accounts via licensed banks and other formal channels with effect from 01 February 2022 and introduce higher interest rates for both foreign currency and rupee denominated deposits of migrant workers.
The Monetary Board was of the view that the new measures will curtail the possible build up of underlying demand pressures in the economy, which would also help ease pressures in the external sector, thus promoting greater macroeconomic stability.
In keeping with this policy stance, the Central Bank expects a corresponding increase in interest rates, particularly in deposit rates, thereby encouraging savings, while discouraging excessive consumption, which also fuels imports.
Therefore, financial institutions are urged to swiftly pass on this increase to deposit rates of the customers.
Moreover, the anticipated adjustment in market interest rates will facilitate the reduction in the Treasury bill holdings of the Central Bank through increased market subscriptions, as enunciated in the Six-Month Road Map for Ensuring Macroeconomic and Financial System Stability.
Meanwhile, the materialisation of the expected foreign exchange inflows through bilateral arrangements and other import financing arrangements with friendly countries are expected to ensure a healthy level of gross official reserves in the period ahead and further strengthen the external sector in the economy. (Colombo Gazette)