ECONOMYNEXT – Sri Lanka’s central bank has discontinued an 8 rupee top-up given for foreign remittances through official channels from printed money effective March 09, after the rupee was allowed to fall to 230 rupees to the US dollar.

“The 8 rupee payment has been discontinued,” Central Bank Governor Nivard Cabraal said.

A 10 rupee top up for dollars held in hand converted at banks has also been discontinued.

The payments given from printed money, expands reserve money, credit and imports and contributes to forex shortages and the overall economic crisis, analysts had warned.

It is a so-called quasi fiscal activity, or an indirect financing of the budget by the central bank new money.

An order to sell 25 percent of remittances and compulsorily converted export proceeds to the central bank remains.

Meanwhile the cabinet on Tuesday had approved a 38 rupee payment to expat workers creating further confusion.

Cabraal said it was a fiscal decision which will be clarified by authorities later.

Minister Dallas Alahapperuma said on Tuesday that the cabinet paper was submitted before the decision to float the currency was made.

The government has a large budget deficit and it is not clear how it will be funded. (Colombo/Mar09/2022)