Grace period to deposit undeclared foreign currency

Ministry of finance

The Finance Ministry has decided to give a one-month grace period to deposit in licensed commercial banks any amount of undisclosed foreign currencies including US Dollars and UK Sterling Pounds earned by Sri Lankan citizens through various channels without any legal impediment or restrictions.

Finance Ministry sources said this measure was referred to President and Finance Minister Ranil Wickremesinghe’s approval on Friday, August 5.

An opportunity will be given to people to deposit any amount of foreign currencies earned through foreign employment, tourism, various other programs and overseas training and workshops and which they still have in their possession during this grace period. However, they will not have to disclose how they came into possession of such foreign currency and there will not be any penalties for not declaring them earlier.

The sources said according to the new measure, an opportunity will be given for them to deposit that money into a Resident Foreign Currency (RFC) Account or convert them into Sri Lankan Rupees (LKR) and then deposit in a normal Rupee account in any licensed commercial bank.

After the completion of this grace period, the law which promulgates that only US$ 10,000 (or its equivalent in any other convertible foreign currency) can be kept in one’s possession without declaration will be re-implemented. Those unlawfully keeping bigger amounts of foreign currency will then be liable for prosecution.

The decision to grant this grace period was taken following a request by Transport, Highways and Mass Media Minister Dr. Bandula Gunawardena from Central Bank Governor Dr. Nandalal Weerasinghe and Finance Ministry Secretary Mahinda Siriwardena who attended a Ministers’ meeting after Monday’s Cabinet meeting.

The Government recently implemented several measures to encourage the legal remittance of foreign currency to licensed commercial banks in Sri Lanka and also unveiled incentives and concessions for expatriate workers, including a permit to import electric motorcycles and cars depending on the value of their USD remittances.

Monthly remittances now hover around the US$ 275 million mark per month, whereas prior to the Covid-19 pandemic it used to exceed US$ 500 million. The collapse of the tourism industry and lower official remittances spelled doom for the Sri Lankan economy, as the country could not find enough dollars to import essentials including fuel.

The Government is negotiating with the International Monetary Fund (IMF) for a bailout package while also seeking assistance from friendly countries. The shortages are also being swiftly addressed by the new Government, while warning that complete recovery could take several years.