Lankan Central Bank stresses on need to strengthen forex reserves

Colombo: The Central Bank of Sri Lanka on Monday said the ongoing scarcity of the US dollar highlighted the need for the island nation to strengthen its foreign exchange reserves, as it defended its recent decision of asking exporters to convert their foreign earnings to rupees regularly at an expedited time-frame.

In an extraordinary gazette dated October 28, the Central Bank's Monetary Board issued new rules according to which exporters of goods and services must convert the residual proceeds of foreign currency into Sri Lankan Rupees on or before the seventh day of the succeeding month.

"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," the apex bank said in a statement on Monday.

The rule to convert foreign currency comes as Sri Lanka battles a severe foreign exchange shortage following a massive dip in remittances from expatriates and the practical standstill of its tourism industry.