Sri Lanka’s banks have been ordered to sell half of the mandatorily converted export proceeds to the central bank, financial sector officials said.

Sri Lanka last week ordered exporters to convert 25 percent of export proceeds into rupees and repatriate dollars by 180 days of a shipment.

Banks have been ordered to sell half of the converted dollars (12.5 percent of the total) to the central bank in a new surrender requirement.

The central bank had already ordered banks to surrender 10 percent of converted remittances. Last year Sri Lanka got 7.1 billion US dollars of remittances.

Last year Sri Lanka exported 10.07 billion US dollars of goods. This year 13 billion dollars are expected Central Bank Governor W D Lakshman said earlier in February.

Sri Lanka’s forex reserves had fallen to 4.8 billion US dollars by January and money printing was putting pressure on the island’s soft-peg with the US dollar as domestic credit gradually recovered from a Coronavirus lockdown and printed money ended up in forex markets.

Any dollar bought by a pegged central bank by-passes the forex market, creates more liquidity and adds to loanable reserves of the banking system.

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