The National Chamber of Exporters of Sri Lanka (NCE) has expressed significant concerns regarding the absence of industry engagement before the implementation of new regulations that drastically reduce the timeframe for exporters to manage their foreign currency earnings.
This concern was prompted by a recent Gazette Extraordinary issued by the Central Bank of Sri Lanka, which mandates exporters to convert foreign currency proceeds held in specified accounts by the tenth day of the following month, a notable reduction in the previous timeline.
While exporters are dedicated to meeting existing obligations to repatriate export revenues back to Sri Lanka, members of the NCE have raised questions about the introduction of a policy that directly affects the export sector without prior consultations with representative organizations and industry stakeholders.
Input from NCE sectoral leaders and council members has highlighted worries regarding the operational, financial, and competitive repercussions stemming from this new requirement.
A primary concern articulated by members is the lack of prior consultation with entities representing exporters, including the NCE itself. They have also inquired whether the bodies responsible for promoting and developing exports were included in discussions and whether a thorough evaluation of the policy’s impact on exporters was conducted before its announcement.
This issue arises during a period of growth for Sri Lanka’s export sector, which reported total exports from January to April 2026 at approximately US$ 5,784.38 million, marking a 4.3% increase compared to the same timeframe in 2025. Merchandise exports for this period reached US$ 4,524.62 million, reflecting a year-on-year rise of 4.8%.
Members pointed out that many exporters maintain foreign currency reserves for legitimate business activities related to their export operations. These activities include importing raw materials and intermediate goods, acquiring machinery, engaging in overseas marketing, and fulfilling foreign currency obligations.
Furthermore, Sri Lanka’s total import expenditure surged by 25.2% year-on-year, reaching US$ 8.23 billion in the first four months of 2026. Imports of intermediate goods, which encompass many raw materials and production inputs used by export industries, increased by 24.1% to US$ 4.7 billion during this period, with fuel constituting a significant portion at US$ 2.17 billion. Textile and textile article imports accounted for US$ 899.4 million, followed by plastics and articles at US$ 205.6 million, and rubber and articles at US$ 95 million. Investment goods expenditure also climbed to US$ 1.52 billion, including US$ 934.2 million on machinery and equipment, indicating considerable foreign currency needs tied to production and export activities.
Moreover, many export industries operate on seasonal production and procurement schedules. Consequently, export proceeds received at one time may only be needed months later to finance subsequent export orders. Members emphasize that a mandatory conversion requirement within a significantly shorter timeframe could disrupt their business planning and cash flow management.
Another concern involves potential additional costs that exporters may face due to the new regulation. Members noted that they could be forced to convert foreign currency earnings into Sri Lankan rupees and then later repurchase foreign currency when payments are due. Such transactions may expose businesses to fluctuations in exchange rates, bank buying and selling spreads, and other transaction costs, thereby increasing their operating expenses.
Exporters with loans denominated in foreign currency have also pointed out possible difficulties arising from the new regulation. Some businesses keep a portion of their export earnings in foreign currency accounts to ensure they can meet future loan payments. The requirement for mandatory conversion could compel these businesses to repurchase foreign currency later, thus exposing them to exchange rate risks and creating cash flow challenges.
In response to these issues, members have suggested incorporating a degree of flexibility into the regulatory framework. One proposal is to permit exporters to retain foreign currency balances if they can demonstrate future foreign currency needs, such as for importing raw materials, purchasing machinery, repaying foreign currency loans, and meeting other operational commitments. This mechanism would allow exporters to submit anticipated foreign currency requirements through their banks to obtain approval for maintaining necessary funds in foreign currency accounts.
Several members have also expressed that efforts to conserve foreign exchange should be part of a broader policy framework.
Official statistics reveal that Sri Lanka’s merchandise trade deficit widened to US$ 3.7 billion during the first four months of 2026, compared to US$ 2.3 billion for the same period in 2025, reflecting a more significant increase in imports relative to exports.
In light of this situation, recommendations have been made to reassess imports of non-essential goods and to explore avenues for reducing foreign exchange outflows without hindering productive sectors of the economy.
There is a consensus among NCE members regarding the necessity of continuing to repatriate export proceeds in line with existing regulations and acknowledging the significance of supporting national economic goals. While recognizing the importance of enhancing the country’s foreign exchange position, many members contend that such measures should not disproportionately burden exporters, who play a crucial role in generating foreign exchange for the country.
Members assert that foreign exchange management strategies will be more effective if developed in collaboration with sectors directly impacted by them. Consequently, the Chamber has underscored the necessity of involving exporter representative bodies and other relevant stakeholders in the policy-making process concerning initiatives that directly affect the export sector and foreign exchange earnings.
