The Central Bank of Sri Lanka (CBSL) has tightened foreign exchange repatriation rules, gazetting a notification that requires every goods exporter to convert all residual export proceeds into Sri Lankan Rupees by the 10th day of the month following receipt.

Under the new requirement, signed by CBSL Governor Dr. Nandalal Weerasinghe, exporters may continue to use incoming export proceeds in Sri Lanka to settle a limited list of authorised payments, but any residual amount sitting in foreign currency after those payments must mandatorily be converted into rupees by the 10th of the following month, the central bank said in a statement on Tuesday.

The instrument carries the force of law through gazette and applies to every exporter of goods who receives proceeds in Sri Lanka during any calendar month.

The order tightens the existing conversion framework, which previously allowed exporters greater discretion over how long they could hold incoming foreign exchange in their accounts. By imposing a fixed monthly deadline tied to the calendar, the CBSL effectively shortens the maximum holding period to roughly 30 days and brings the entire goods-export channel under a single repatriation timetable. Currency dealers told EconomyNext the central bank had been signalling for some time that conversion windows would be cut if exporters delayed repatriation while waiting for the rupee to fall further, and that the move would help stabilise the currency at least temporarily.

The central bank used US$211 million in May alone to defend the spot rate, EconomyNext reported, after the rupee touched a four-year low on May 21. The currency has fallen by around 8 percent against the US dollar so far this year, and importers have been booking forward cover amid fears of further weakness while exporters delayed conversion. Some analysts have linked the imbalance to excess rupee liquidity created by the central bank’s earlier aggressive dollar purchases to rebuild reserves, which then fed back into stronger import demand and renewed pressure on the spot rate.

The move comes against the backdrop of a sustained rupee slide. Sri Lanka’s currency closed at 337.00/75 to the US dollar on Tuesday, the spot rate weaker again from 337.00/30 the previous day, and the CBSL has cited 5.4% year-to-date depreciation through end-May in its most recent weekly indicators. Governor Weerasinghe warned in early June that inflation could climb back to around 7% over the next twelve months as Middle East tensions push up imported energy costs and the rupee continues to weaken.

Mandatory conversion of residual export earnings is a familiar policy lever in foreign exchange-constrained periods. Sri Lanka first imposed conversion rules on goods exporters in 2021 during the run-up to the 2022 default; those rules were progressively relaxed as reserves recovered post-restructuring. Tuesday’s gazette is the first formal tightening of the conversion regime since the post-IMF programme normalisation began and signals that the central bank views the current pressure on the spot rate as serious enough to invoke a regulatory backstop on exporter behaviour.

An EconomyNext explainer published the following day set out the order’s reach and what residual dollars exporters may still hold. The repealed framework had given direct and indirect exporters a roughly 90-day window to convert; the new instrument compresses that to about 30 days and explicitly captures indirect exporters — local suppliers paid in foreign currency by primary exporters — closing a regulatory channel that had sat outside the conversion regime. Apparel, tea, rubber and IT services are the sectors most exposed to the tighter cash cycle, and the limited set of authorised retention purposes covers direct import costs for raw materials, immediate foreign debt servicing, approved overseas travel and expatriate salaries; any balance left after those uses must be liquidated by the tenth of the following month.

The CBSL did not disclose the size of residual foreign currency balances currently held by exporters, but the implicit policy concern is that holding back conversion in the expectation of further rupee weakness adds to the daily spot-market shortfall and amplifies the depreciation cycle.

The gazette is the second exporter-side regulatory action this quarter. The Treasury directing CBSL on FX market clearing was publicly questioned in late May by IMF Sri Lanka mission chief Peter Papageorgiou, who said the central bank should be the first line of defence.

Sources