Sri Lanka to relax Foreign Exchange controls: Central Bank Governor

Central Bank of Sri Lanka (CBSL) is in a policy decision to allow Sri Lankans to open bank accounts abroad and buy shares and debt of foreign companies as part of a loosening of foreign exchange controls, Central Bank Governor Ajith Nivard Cabraal revealed.

At the same time, foreign investors would also be allowed to buy into Sri Lankan corporate debt, making flexible the current procedure of allowing the foreigners to buy only the government Treasuries.

The CBSL Governor presenting the “Road Map: Monetary & Financial Sector Policies for 2010 and Beyond” at the Central Bank yesterday (January 04) said that foreign investors had bought 1,705 million US dollars of Treasury bonds and bills from May to November in 2009.
The Central Bank Governor said that insurance firms here will also be allowed to invest abroad and the Sri Lankan firms would also be allowed to list abroad.

He also revealed on implementation of a mandatory deposit insurance scheme to strengthen public confidence in the financial sector. He said that the initial deposit insurance fund will cover up to Rs.100, 000 per depositor in licensed banks and finance companies. “The deposit insurance scheme will also include a liquidity support scheme that would extend liquidity to a needy bank or a finance company by way of a loan, to avoid any systemic threat, the Governor added.

He further said Sri Lanka's foreign reserves were at a historic high of 5.2 billion US dollars and in 2010 the balance of payments was expected to register a surplus of 700 million US dollars. Foreigners on tour or business in Sri Lanka would also be allowed to open Sri Lanka rupee accounts. “The operating instructions to banks on the new foreign exchange rules were now being prepared”, he said.

“As the dawn of peace has brought about a positive outlook for the tourism industry, higher tourist arrivals is recorded since June and average arrivals increased by 20.9% during the period from June to November 2009”, the Governor explained. He also added that the trend is expected to continue into 2010 as the number of tourist arrivals are expected to comfortably exceed the historical high of 566,000 arrivals in 2004.

The Governor also outlined the measures which were taken to boost reserves during last year such as entering into SWAP facilities in USD, arranging special funding lines from friendly countries in case of reserves reaching very low levels, promotion of investments in Treasury bills and bonds among the Sri Lankan diaspora and migrant workers, payment of a bonus interest on interest earned on NRFC and RFC deposits to encourage remittances of foreign exchange earnings, introduction of tax concessions on foreign income and profits earned through providing services to non-residents, allowing greater flexibility in the exchange rate to enhance export competitiveness, providing fiscal stimulus to provide relief to export industries.

- Asian Tribune -