You are here:: In Parliament Oral Q and A Oral Question Answer Hon. Mr. Ravi Karunanaya​ke in Parliament on 17th Jan 2012 QN.0647/10
 
 

Oral Question Answer Hon. Mr. Ravi Karunanaya​ke in Parliament on 17th Jan 2012 QN.0647/10

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a)    Will he admit that during 2009 January – May, an active shortage of foreign exchange was prevailing in the country;

A deficit of liquidity arose in the local exchange market due to the withdrawal of capital by foreign investors to their own countries in the face of adverse global circumstances in the first half of the year 2009.  Outflow of foreign exchange was in a high level in the first quarter of the year 2009 owing to the outflow of foreign investments made on treasury bills and bonds as a result of the global economic crisis as well as non-reinvestment at the maturity of short term debts and payment of petroleum bills of high value.  Accordingly, the Central Bank of Sri Lanka mediated in the market activities in order to maintain the liquidity of the local foreign exchange market adequately.  Accordingly, US $ million 546 was supplied to the market by the Central Bank of Sri Lanka in the first quarter of the year 2009.


A rapid increase was shown in the foreign exchange inflow from the middle of the month of April 2009 with the presumption that the conflicts in the North and East would come to an end within a short period of time.  US $ million 160 was absorbed from the local foreign exchange market by the Central Bank of Sri Lanka due to the increase of foreign exchange inflows within the month of April and May in the year 2009. As a result, the exchange reserves in possession of the Central Bank increased and the exporters were protected with the enormous appreciation of the rupee.

b)    Will he state –

i)    The names of the various schemes offered by the Central Bank in order to attract foreign exchange;

•    Granting a bonus interest in rupees on interest earnings.

A bonus interest in rupees was granted on its interest earnings with effect from 01st February 2009 with the aim of encouraging deposits of residential and non-residential foreign currency accounts.


•     Promotion of Investments

Investments on treasury bills and bonds were promoted among Sri Lankans living abroad.

•    Simplification of Exchange Control Regulations.

Exchange Control Regulations were simplified with the aim of promoting direct foreign investments.


•     Initiating exchange facilities with a central bank in the region.

Steps were taken to initiate exchange facilities with a Central Bank in the region.


•     Stand by arrangement facility from the International Monetary Fund.

Actions were taken to acquire the standby arrangement facilities from the International Monetary Fund.


ii)    The schemes still remain out of them;

•    Further simplification of exchange control regulations for the promotion of investments.

•    Stand by arrangement facility of International Monetary Fund.

•    Exchange facilities made with a Central Bank in the region.

iii)    Whether there was a special 20% added on to NRFC account holder and it is still functioning?

A bonus interest was granted on interest earnings of residential and non-residential foreign currency accounts with effect 01st of February 2009.  However, the said interest bonus payments were suspended with effect from 01st of October 2009 with the increase of foreign exchange inflows.

c)    Will he also state –

i) The schemes offered by the Budget of 2009 and in mid-2009 to encourage the savings;

The under mentioned scheme was implemented in 2009 to encourage savings.

Tax on Interest Income

Withholding Tax (WHT) on interest received by money deposits in a financial institution was reduced as mentioned below.