Sri Lanka government cenbak says to examine possible illegal money channels as remittances decline

COLOMBO, Dec. 4 (Reuters) – Sri Lanka’s top central bank official said on Saturday that remittances had declined in the past six months, prompting authorities to consider whether the sudden drop in foreign inflows was linked to the use of illegal channels for transactions.

Ajith Nivard Cabraal, the bank’s governor, told reporters he saw a $ 300 million drop in remittances over the past month and added that officials will work with local banks to facilitate and expedite cash inflows.

Cabraal was referring to the informal channels commonly referred to as Hawala systems that operate outside the normal banking network for international and domestic money transfers.

Cabraal said he didn’t want the rupee, which has fallen 7% against the dollar this year, to depreciate further.

Sri Lanka’s foreign exchange reserves fell to $ 2.3 billion at the end of October, as the coronavirus pandemic hit both tourism and remittances. The country needs about $ 4.5 billion to service its sovereign bonds in 2022, according to finance ministry data.

Earlier this month, Cabraal told Reuters that Sri Lanka aims to consolidate its dwindling reserves over the coming months from a range of sources, including bilateral trade, government-to-government loans and the securitization of remittances to build investor confidence and ensure timely debt service. .

However, economists say measures taken by the central bank to encourage migrant workers to send remittances using formal channels are unlikely to redress the country’s precarious financial situation.

Written by Rupam Jain, edited by Shri Navaratnam

Our standards: Thomson Reuters Trust Principles.