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The Central Bank is working on replacing the country’s Exchange Control Act with a new legislation titled Foreign Exchange Management Act (FEMA) in an effort to liberalise currency regulations in line with internationally accepted practices, the governor of the Central Bank Arjuna Mahendran said on Thursday.

Addressing a press conference held at the Central Bank auditorium, the governor noted that the new exchange management law would relax many of the existing controls, including that for Paypal, the popular worldwide online payments system that enables money transfers but however take time to be legislated.

“Sri Lanka was left out of Paypal’s network of countries where inward remittances could be made because the island’s exchange controls did not allow refunds to be made. In the meantime the Controller of Exchange, using his powers has exempted Paypal from the exchange control requirement. So we are now awaiting Paypal’s response,” Mahendran explained.

The foreign exchange management function in Sri Lanka is exercised by the Central Bank of Sri Lanka on behalf of the Government through the Exchange Control Department. Foreign exchange management policies are based on the provisions of the Exchange Control Act No. 24 of 1953. The Exchange Control Act regulates dealings in gold, currency, payments, securities, debts, imports and exports, transfer and settlement of property.

Sri Lanka has liberalized its exchange control regime substantially since opening its economy in 1977, achieving complete current account convertibility in 1994 and substantially liberalizing capital transactions over the years.

The Central Bank of Sri Lanka with the objective of expanding the economy of the country and to further integrate the Sri Lankan economy with the global economy, is in the process of further relaxing and simplifying rules and regulations applicable to foreign exchange transactions.