The Central Bank of Sri Lanka introduced a Margin Deposit Requirement against the importation of selected non-essential/non-urgent goods. The policy is expected to support the ongoing efforts to preserve the stability of the exchange rate and foreign currency market liquidity, particularly by discouraging excessive imports of speculative nature.
The 100% cash deposit margin was emplaced on goods that were imported excessively over the first seven months of 2021. Telecommunication device (mobile phones and fixed telephones) imports stood at US$ 250 million in January – July period of 2021, while US$ 268.4 million and US$ 247 million were spent annually in 2020 and 2019 respectively. Due to the excessive importation of mobile phones carried out by importers in the first seven months of the year, there is sufficient supply for the remainder of the year.
The policy discourages the importation of certain goods that were speculatively over purchased and others deemed non-essential/non-urgent. The reduced pressure on the foreign currency market will increase the stability of the exchange rate set by the central bank. This will allow Sri Lanka to import essential goods such as fuel, wheat, sugar and other food items at a cheaper rate reducing the burden on households.
What is 100% cash deposit?