Sri Lanka lowers amount of foreign currency people can hold amid economic crisis

Central Bank Governor Nandalal Weerasinghe told reporters that people are requested to deposit excess foreign currency in a bank or convert it into local currency within two weeks of the announcement.
A protest march in Colombo, Sri Lanka. (AP)
A protest march in Colombo, Sri Lanka. (AP)
Published on May 19, 2022 05:43 PM IST
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Sri Lanka will lower the amount of foreign currency that individuals can hold to $10,000 from $15,000, and penalize anyone who holds foreign currency for more than three months by making it against the law, the island nation’s central bank chief announced Thursday amid the worst economic crisis in recent memory.

Central Bank Governor Nandalal Weerasinghe told reporters that people are requested to deposit excess foreign currency in a bank or convert it into local currency within two weeks of his announcement. After that time, central bank officials together with police will carry out raids, he said, adding that anyone found violating the new rules will be fined.

The move, which will be implemented under the country’s foreign exchange act, comes amid a severe shortage of foreign currency that has resulted in difficulties in paying for the import of essentials such as fuel, cooking gas, medicine and food.

For several months, Sri Lankans have endured long lines to buy those essentials, most of which come from abroad. Shortages of hard currency have also hindered imports of raw materials for manufacturing and worsened inflation.

Also read: Sri Lanka out of petrol, economy in a precarious condition: PM Ranil Wickremesinghe

Protesters were blocking main roads to demand gas and fuel, and local television channels showed people in some areas fighting each other over gas and fuel.

Weerasinghe said black-market premiums have led people to collect foreign currency bank notes and keep them at home or in vaults.

Police recently raided two unspecified places that had foreign currency notes and seized $40,000 and 50,000 euros.

The Indian Ocean island nation is on the brink of bankruptcy and has suspended payments on its foreign loans. Its economic woes have brought on a political crisis, with the government facing widespread protests.

Sri Lanka has suspended repayment of about $7 billion in foreign loans due this year out of $25 billion to be repaid by 2026. The country’s total foreign debt is $51 billion. The finance ministry says the country currently has only $25 million in usable foreign reserves.

Sri Lanka is now almost without petrol and faces an acute shortage of other fuels as well. Authorities have announced countrywide power cuts extending up to nearly four hours a day because they can’t supply enough fuel to power generating stations.

Protesters have occupied the entrance to the president’s office for more than a month calling for President Gotabaya Rajapaksa’s resignation. Months of anti-government rallies have led to the near-dismantling of the once-powerful ruling family, with one of the president’s brothers resigning as prime minister, and other siblings and a nephew leaving their Cabinet posts.

Also read: Sri Lanka economic crisis: CID interrogates 4 MPs over attacks on protesters

Protesters accuse the Rajapaksas of triggering the crisis through corruption and misrule.

Sri Lanka's new Prime Minister Ranil Wickremesinghe said Monday that about $75 billion is needed urgently to help provide the nation with essential items, but the country’s treasury is struggling to find even $1 billion.

Attacks by Rajapaksa's supporters on protesters last week sparked nationwide violence that left nine people, including a lawmaker, dead and more than 200 wounded. Many homes of lawmakers and their supporters were burned down.

Protesters who have crowded the streets since March hold Rajapaksa and his family — who have dominated nearly every aspect of life in Sri Lanka for most of the last 20 years — responsible for the crisis.

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