Sri Lanka seeks more dollars, inflation up

[TamilNet, Friday, 15 September 2006, 19:55 GMT]
Sri Lanka’s Central Bank has asked the country’s licensed money changers to increase collections to be allowed to continue in business but a new tax may be pushing more dollars underground, Lanka Business Online reported Thursday. Meanwhile, AFP reported inflation is running at 15%.

Licensed money changers are expected to buy foreign exchange from tourists and those who return from working abroad and deposit it in commercial banks.

According to their license, money changers cannot sell foreign exchange back to customers.

The Central Bank says money changers have to supply more dollars to the system in order to justify their being allowed to continue in business.

“You have to ensure that your own function and your own trade is made an indispensable trade. For that, you have to ensure that more and more money comes into the system,” Central Bank Governor Nivard Cabraal told Sri Lanka’s 60-odd money changers this week.

The central bank recently tightened regulations on money changers, while the newly introduced money laundering act also required them to report transactions above half a million rupees.

Customers also have to be issued receipts and a copy with their national identity card or passport number retained with the money changer.

But money changers told LBO increasing regulations are discouraging customers from coming to them, and some people send money through friends and relatives.

Dollar deposits from money changers climbed steadily to 180 million dollars in 2004. That it was around 8-10 percent of the country’s reserves and total inward remittances, LBO said.

But in 2005 deposits fell sharply in 2005to less than half that, about 70 million dollars, but has recovered somewhat to 65 million dollars in the first half of 2006, after a tax on gold was eased.

The tax on imported gold led to unofficial gold being hand carried through the airport, and the foreign exchange may have leaked for that purpose.

Another reason for reduced deposits is said to be falling tourist arrivals in the wake of the December 2004 tsunami.

Meanwhile, year-on-year inflation hit 15.3 percent last month, up from 10.9 percent a year ago, and is one of the highest in South Asia, AFP reported Thursday, relating the rise to Sri Lanka’s heavy expenditure on military hardware.

Sri Lanka's central bank is hoping the country will see economic growth of seven to eight percent this year but the 25-billion-dollar economy depends on up to one billion dollars in external aid, and any reduction of that figure could upset the balance sheet, AFP said.

Some analysts argue Sri Lanka’s black economy may be as big as the official one. Some also see it as a vital safety net cushioning many ordinary Sri Lankans from the high cost of living.

International ratings agencies Fitch and Standard and Poor's downgraded Sri Lanka's outlook to negative in April.

 

Latest 15 Reports
23.08.19 07:04  
SL Forest Department remains unmoved by uprooted Tamils’ demand for resettlement
22.08.19 06:50  
40 parents of missing persons die within 915 days of protest
21.08.19 18:17   Photo
‘Death certificates’ issued to 500 of 3,500 Tamils subjected to enforced disappearance in Ampaa'rai
20.08.19 20:23  
Wigneswaran warns of bleak future for Tamils, urges planning for next step
19.08.19 19:23   Photo
IC sheds crocodile tears over Shavendra appointment, US engages with his war-time chief
18.08.19 23:50   Photo
SL TID detains outspoken Tamil doctor at Pazhai hospital
17.08.19 23:08   Photo
SLA Jaffna commander refuses to release Palaali lands at meeting presided by Wickramasinghe
16.08.19 13:25   Photo
SL Archaeology Department resumes plans to construct controversial ‘chaitya’ at Koonith-theevu
15.08.19 21:39  
Wickramasinghe lacks courage to meet protesting Tamil mothers in North
14.08.19 23:31   Photo
2006 genocidal massacre at Chengchoalai campus marked in Vanni, Jaffna amidst PTA-threats
13.08.19 17:45   Photo
Tamil awareness urged on geopolitics-driven genocidal ‘development’ in Mannaar
12.08.19 20:04   Photo
Percival's 19th century Tamil proverb compilations collated and sorted in new publication
11.08.19 20:32   Photo
PTA-threats against constructing memorial arch for student victims of 2006 aerial massacre
10.08.19 22:49   Photo
Sinhala encroachers storm into 100 acres of lands at Kanneeraavi in Pulmoaddai
09.08.19 14:28  
SL Forest Department retains 8,034 hectares of pasturelands in Paduvaan-karai, Batticaloa
 
Find this article at:
http://www.tamilnet.com/art.html?catid=13&artid=19606