Jan 12, 2014 (LBO)- Sri Lanka’s monetary and information technology authorities are in discussions over freeing Paypal inward payments for citizens in the country, Central Bank Governor Nivard Cabraal said.
Sri Lanka had full capital mobility for several centuries until the establishment of a money printing central bank in 1951, which led to currency depreciation due to so-called ‘soft-pegging’ with the US dollar triggering draconian exchange controls.
Foreign exchange troubles and high inflation were also briefly seen in the early 1800s after British authorities, took-over coastal areas from the Dutch started printing paper Rix Dollars excessively, a currency which was earlier silver-based, historical accounts show.
Central Bank Governor Cabraal said his officials were now in talks with Sri Lanka’s ICT Agency, another state body, over freeing outward payments through Paypal.
Governor Cabraal last year told LBO that freeing inward remittances through Paypal was being looked at “seriously” as the country had to move with the times.
Paypal is a worldwide payments system that evolved out of the US, where small payments can be sent to over 190 countries at the moment.
Full Paypal freedoms are available in most free countries but some nations, including Sri Lanka are yet to allow payments to be received and withdrawn via Paypal.
Sri Lanka has already freed outward payments by Paypal accounts, which can be linked to credit cards.
But to run a Sri Lanka based e-business selling goods, or to provide professional services abroad, a Paypal account must be able to receive money. Small e-service providers – especially individuals – have been asking for the service.
To receive money and withdraw cash, a Paypal account must be free to be linked to a domestic bank account.
Many free countries in Asia, including Japan and South Korea allow full Paypal freedoms.
China has also allowed payment freedoms, but the country with a state-dominated banking system has a very high 35 US dollar withdrawal fee for wire transfers as well as additional bank charges.
The special administrative region of Hong Kong, one of the areas recognized as having the highest economic freedoms in Asia has a fee of 3.5 HK dollars for small transactions with large ones being free.
Singapore and Malaysia follows the same model.
Fast liberalizing Vietnam has allowed Paypal inward payments for many years and has a fee of 60,000 dong (less than 3 US dollars) for withdrawals.
The country has an active and fast growing e-business sector with large ASEAN based e-commerce firms also setting up shop and providing competition.
Freer countries like the US, UK and Switzerland allow free Paypal withdrawals with no fee.
Governor Cabraal has already removed many foreign exchange restrictions slapped on Sri Lankan citizens by the state after gaining independence from Britain. In a road map for 2014 further exchange control relaxations were announced.