CB Governor Nandalal puts his foot in his mouth misleading public
Central Bank Governor Nandalal Weerasinghe now has to “put his foot in his mouth” as the statement made by him in an interview on 08-12-2022 which appeared to have been withdrawing his repeated accusations of exporters for stashing dollars overseas comes under criticism of Trade unions collective and professionals.
In a lengthy article signed by Swasthika Arulingam, President, of Commercial and Industrial Workers’ Union and United Federation of Labour on behalf over 20 trade unions and associations of public interest and social activists along with 2 professionals, it has charged that suppression of wages in the export sector as a whole is the fundamental factor enabling exporters to illegally retain incomes abroad.
The front page lead article appeared in Daily FT today under the banner headline ‘Misleading responses by CBSL Governor, JAAF, TEA and Rohan Masakorala on illegal foreign exchange transfers highlighted that the the CBSL Governor has misinterpreted the Sri Lankan monetary law by stating that merchandise exporters can repatriate foreign exchange without having to convert such proceeds.
LNW was the first local media which has brought to the notice of CB Governors double standard on foreign exchange stashing overseas, in an article published on 9 Dec 2022. (https://lankanewsweb.net/archives/24970/cb-governor-on-reverse-gear-relating-to-exporters-stashing-dollars-overseas/).
However the latest article on this issue of public interest and very important for the country’s dollar crisis pointed out that the law of the land states that if funds are repatriated the conversion will happen through the local commercial banks by the first week of the following month after the date of repatriation.
This was clearly indicated in Point 8 of CBSL FAQ on Gazette Extraordinary No. 2251/42, dated 28.10.2021). It stipulated that only services sector exporters are authorised by law to repatriate proceeds without converting.
The article of the President of Commercial and Industrial Workers’ Union noted that CBSL Governor recently declared that apparel exporters repatriated only 14% of their export income while their value addition or residual income is around 55% of the gross revenue after meeting various foreign exchange obligations.
He acknowledged, however, that this may be due to exporters utilizing these dollars for approved local purchases. These would include the purchase of both diesel from CPC and LIOC, and domestically produced raw materials which are required for the industry.
It is general knowledge that apparel exporters procure only a few inputs from local suppliers and the rest is all imported. Local suppliers’ inputs usually include knitted fabric, printing and packaging.
They form part and parcel of the input cost of 45% from gross revenue. Therefore, even if all local inputs are procured using foreign currency, they need to be paid from 45% attributed to the input cost from gross revenue, it added.
On the other hand any sensible person would understand it is impossible for the garment factories to consume petroleum to the extent of 41% of their gross revenue.
If their assertions were true, then out of Sri Lanka’s total petroleum expenditure of $ 4.16 billion during the first 11 months of 2022 the garment exporters alone would have consumed 54% or $ 2.24 billion worth of fuel, which is impossible, it emphasized.
It states that “money launderers tend to use international trade to effect their laundering activities by the means of inaccurate pricing (mis-invoicing) of imports and exports to hide the transfer of funds.
For example, over-invoicing of an import will permit the transfer of funds outside the country.” Even the Justice Minister Wijeyadasa Rajapakshe told the Parliament recently that $ 53 billion was transferred out by exporters in the last 12 years.
In this light, trade unions and professionals demand both the CBSL and the Government to take immediate action to repatriate the illegally transferred funds and bring the perpetrators to justice.
They also called on the government to set up a Parliamentary Select committee with competent persons without conflict of interest to investigate the matter and recommend strong punitive and remedial action.