Sri Lanka has temporarily suspended a requirement imposed on banks to surrender a part of remittances and export receipts to the central bank, financial sector officials said.

In February the central bank asked banks to surrender 10 percent of inward remittances converted to rupees by recipients to the central bank and 12.5 percent of exporter proceeds.

Banks were instructed late Wednesday that the instruction were suspended with immediate effect. One week dollars hit a record 202/203 rupees on Wednesday. The rupee strengthened on Thursday.

The surrender requirement may be re-imposed later. A surrender requirement takes away dollars that are available to redeem rupees (liquidity) that hit the forex market while simultaneously adding fresh liquidity. In February exporters were asked to repatriate foreign exchange earnings within 180 days of shipment and convert 25 percent into rupees. The requirement is still in place.

But exporters were given extra 14 days to convert dollars after receipt if the funds were remitted before six months in an order issued on March 09.

-Economy Next-