ECONOMYNEXT – Inflows to Sri Lanka’s rupee bond markets backed by a forex risk cover will have wide positive effects including on the stock market, State Minister for Money, Capital Markets and SOE reform Nivard Cabraal said.
Sri Lanka is offering a foreign exchange risk cover of between one to two years through a rupee/dollar swaps with the spot and forward rate unchanged.
“There is no cost to the investor,” Minister Cabraal said. “The investors can make decisions based on the interest rate.”
The cabinet decision said any cost to the central bank will be set off against future profit transfers to the Treasury. A dollar denominated instrument offers the same benefit.
Minister Cabraal said there was no decision to offer forex cover for stock investments at the moment, though the cabinet approval for swaps also kept the door open for unspecified other investments.
“The swap will be offered for bills and bonds,” Minister Cabraal said. “But when inflows come they will have wide positive effects on the entire economy including the stock market.”
Sri Lanka has seen steady flight of capital from rupee bonds from around 450 billion rupees to around 12 billion over the last few years as the rupee fell from 131 to the US dollar to around 185 to the dollar.
Over the last two weeks there had been small inflow. (Colombo/Sept14/2020)