Exchange Control Act to be axed

By Hiran H.Senewiratne

"If Sri Lanka is to become a major financial hub in the region, the first thing to do is to abolish the archaic Exchange Control Act, in order to ease foreign exchange transactions in the country, Central Bank Governor Arjuna Mahendran told The Island Financial Review.

Mahendran said that in 1973, exchange control offices were made criminal offences under the law, which deterred many genuine Sri Lankns who lived abroad from bringing their money to Sri Lanka. A proposed Act will make exchange control offences civil offences in order to encourage free transactions of foreign exchange, he said.

The Governor also said that most countries in the region, specially Singapore, Dubai and Malaysia, do not have strict exchange control laws, and this allows people to transact in foreign exchange freely. "This paved the way for those countries to become financial hubs in the region, the Governor explained.

If the new Exchange Control Act comes into play, more than 1.2 million Sri Lanka living abroad will bring money into the country, which would definitely give some relief for the country's foreign reserve crisis, he said.

The CBSL chief said that Sri Lanka is going through a foreign exchange reserve crisis due to low exports. The latter contribute 13 percent to the national GDP. As a measure to increase government foreign reserves, abolishing of the Exchange Control Act is a need of the hour, he said.

"Global business means there can be no foreign exchange controls. People will deal with any currency. There will not be exchange controls and we will be operating in the global economy, the CBSL Governor added.

Sri Lanka's decades old, archaic Exchange Control Act will be abolished soon by bringing necessary controls to the Monetary Act and the Banking Act, to encourage free flow of foreign exchange into the country, Minister of Finance Ravi Karunanayake said recently.

"It is because we want to keep abreast with other countries. Today there are investments of around 500-600 million dollars coming into the country. The Prime Minister will soon bring in 15- 20 new Acts of Parliament, the minister said at an event in Colombo.

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