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Sri Lanka's new Foreign Exchange Act came into operation towards the latter part of 2017 consequent to it being passed in the parliament. The new Act titled Foreign Exchange Act no.12 of 2017 covers matters including classes of capital transactions, opening and maintenance of Foreign Currency accounts, permitted investments and granting of loans and advances. The regulations under the said Act have been published by Gazette No 2045/56 issued on 17th November 2017.
Under the new Act, all existing Foreign Exchange Earners' Accounts (FEEAs), Inward Remittance Distribution Accounts (IRDAs) and Foreign Currency Accounts for Agents of Foreign Shipping Line or Air Lines (FCAAF SAs) has been re-designated as Business Foreign Currency Accounts (BFCAs). An individual or a company resident in Sri Lanka who earns foreign exchange is entitled to open and maintain Business Foreign Currency Accounts with an Authorized Dealer. An eligible entity shall include an Individual, Sole Proprietorship, Partnership, Company incorporated in Sri Lanka or a Company incorporated outside Sri Lanka, which is registered as an overseas company under the Companies' act no.7 of 2007.
The Business Foreign Currency Account (BFCA) may be opened and maintained as Current (without cheque drawing facility), Savings or Term Deposit accounts in any designated foreign currency. An exporter of goods or services is entitled to open the BFCA on the basis that they earn foreign exchange. Therefore, exporters are able to accumulate their foreign currency earnings in the BFCA and they are permitted to make outward remittances as well as make disbursements in Sri Lanka in Sri Lankan rupees in order to meet their business and related expenses.
In terms of the Directions issued under the Foreign Exchange Act, Authorized Dealers are permitted to grant loans in foreign currency to persons resident in Sri Lanka who maintain Business Foreign Currency Accounts. These foreign currency loan proceeds may be utilized for any purposeDownload PDF