Penalty interest rates on exports from June

Sri Lanka will impose penalty interest rates on exports from June 1 to force exporters to covert dollars reviving measures usually imposed by the Central Bank during a balance of payments crisis.

In a circular issued to banks, exporters with packing credit facilities who do not use export proceeds to settle the accommodations after 90 days will be charged a five percent penal interest and then two percent for every month for every month they delay. Exporters can borrow rupees and keep their dollars without settling their export credit facilities expecting the rupee to depreciate. Sri Lanka first imposed similar regulations with a 10 percent extra penalty rate, during a balance of payments crisis in 2001. This was removed in October 2014.

The regulator told banks in a new direction that the circular is re-imposed but with a five percent penalty rate instead of 10 percent which will be effective from June 1.