The recent mandate issued by the Central Bank of Sri Lanka (CBSL) requiring all registered tourist establishments to accept only foreign exchange (forex) from tourists lacks an appropriate mechanism to monitor the conversion of forex into LKR, according to the hotel associations in Sri Lanka.
Speaking to The Sunday Morning Business, Sigiriya Tourism Association President O.K.D. Chaminda Jayantha stated that there had been no definite progress in the regulation issued by the CBSL, as a proper mechanism was yet to be prepared at ground level to monitor forex conversion.
“Foreigners make big payments using their cards but when it comes to small boutiques, the payment is not monitored properly as there are chances of payments being submitted in LKR or US Dollars. An appropriate mechanism to monitor these activities has not been prepared yet,” Jayantha said.
He asserted that the Government should take an initiative to implement this mechanism in a more comprehensive manner. Even though this mechanism had been sent out to hoteliers to be followed, ground-level progress within the industry was yet to be made, he noted.
Meanwhile, Tourist Hotels Association – Habarana Past President K. Ranasinghe said that this directive issued by the CBSL was “practically difficult” as most of the tourists who visited Sri Lanka settled their hotel payments before arrival using their credit cards.
Explaining further, he stated that he could not see any progress so far in terms of the directive as the majority of foreigners who visited Sri Lanka preferred to make payments via credit card instead of converting their currency into Sri Lankan rupees.
However, The Hotels Association of Sri Lanka (THASL) President Shanthi Kumar told The Sunday Morning Business that it was too early to comment on the effectiveness of the regulation implemented by the CBSL and that it was gradually being followed by tourists visiting the country.
In January 2022, Kumar welcomed the directive issued by the CBSL, stating that it would be “absolutely beneficial” for industry stakeholders.
He explained that even though the hotel industry would not benefit monetarily via this measure, hotels which had obtained loans utilising foreign currency in the past years would now be able to reimburse their loans in instalments.
He said another reason why this measure would be beneficial was that hotels catering to the tourism industry frequently imported certain food ingredients, housekeeping goods, and other essentials and now they could import this using the forex they had earned.
Meanwhile, Licensed Commercial Banks such as Commercial Bank, Bank of Ceylon, and Sampath Bank noted that it was too early for them to comment on the effectiveness of the measure since its implementation.
In January 2022, the CBSL issued a mandate requiring all registered tourist establishments to accept only foreign exchange in respect of services rendered to a person resident outside Sri Lanka, under the Monetary Policy Review – No. 1 of 2022.
During the initial announcement, CBSL Governor Ajith Nivard Cabraal stated: “We will ask them (tourists/non-residents) to either pay with their credit cards or pay at the time of checkout in the currency of a foreign nation. If they encash, they will have to go to an authorised dealer and encash. Then they will have a receipt and they can show a receipt to that value.”
The CBSL anticipates that this policy measure will have a positive outcome on increasing forex liquidity within the domestic forex market as the tourist hotels in turn are expected to deposit the dollars in banks within two or three days of receipt.
According to Minister of Tourism Prasanna Ranatunga, February saw the highest number of visitors per month in two years with the number of tourists who arrived in the country in February reported as 96,507.