An Echelon Media Company
Wednesday February 28th, 2024

Sri Lanka extends new exchange controls till July 02, 2021

ECONOMYNEXT – Sri Lanka has extended exchange controls introduced after a steep fall in the currency around March and April 2020, in the wake of a bout of money printing till July 01, 2021.

Sri Lanka already has capital controls. Sri Lanka tightened exchange controls progressively after setting up a money printing central bank in 1950 and completely closed the economy in 1971.

Monetary instability has worsened after the central bank started targeting call money rates abandoning a policy corridor under a ‘flexible’ inflation targeting with a ‘flexible’ exchange rate, which critics say amounts to un-anchored policy.

Sri Lanka has also controlled imports.

The full statement is reproduced below.

Continuation of Measures Taken to Preserve the Foreign Currency Reserve Position of Sri Lanka

With a view to preserve the foreign currency reserve position of the country and considering the possible negative impact to the Sri Lankan economy due to the Covid-19 pandemic situation, the Hon. Minister of Finance with approval of the Parliament has issued an Order published in the Gazette Notification No 2206/25 dated 18 December, 2020, extending the period of validity of the Order published in the Extraordinary Gazette Notifications No. 2182/37 dated 2 July, 2020, for further six months from 2 January, 2021, based on the recommendations made by the Monetary Board of the Central Bank of Sri Lanka.

Accordingly following restrictions on outward remittances on Capital Transactions will be effective till 1 July 2021.

1. Suspension of the general permission granted to make outward remittances for investments overseas through the Outward Investment Accounts by persons resident in Sri Lanka excluding the following;

a. investments to be financed out of foreign currency loans obtained by the investor from a person resident outside Sri Lanka under the provisions of the Foreign Exchange Act,

b. an additional investment to be made to fulfill the regulatory requirement in the investee’s country applicable on the investment already made in a company or a branch office in that country,

c. an additional investment/infusion of funds to be made by eligible resident companies in already established subsidiaries or branch offices in overseas up to a maximum of USD 20,000, for the purpose of working capital requirements of the investee,

d. the remittances up to a maximum of USD 20,000, for the purpose of maintenance of liaison, marketing, agency, project, representative or any other similar offices already established in overseas.
Department of Foreign Exchange
2021.01.05

2. Suspension of the outward remittances through Business Foreign Currency Accounts (BFCAs) or Personal Foreign Currency Accounts (PFCAs) held by persons resident in Sri Lanka, other than for the remittances on current transactions up to any amount or capital transactions up to a maximum of USD 20,000.

3. Limitation of the eligible migration allowance for the emigrants who are claiming the migration allowance for the first time, up to a maximum of USD 30,000.

4. Limitation of the repatriation of funds under the migration allowance by the emigrants who have already claimed migration allowance up to a maximum of USD 20,000.

5. Limitation of the authority of the Monetary Board of the Central Bank of Sri Lanka to grant special permission for investments on case by case basis, which exceeds the limits specified in the general permission, only to those satisfying the criteria mentioned in 1.a and 1.b above.

The above restrictions are only applicable to the identified capital transactions and do not impose any restrictions on already permitted current transactions.

Further information can be obtained by visiting www.dfe.lk

Leave a Comment

Your email address will not be published. Required fields are marked *

Leave a Comment

Leave a Comment

Cancel reply

Your email address will not be published. Required fields are marked *

Sri Lanka Treasuries yields edge up after steep fall

ECONOMYNEXT – Sri Lanka’s Treasury bill yields edged up across maturities at Wednesday’s auction with the 3-month yield up 09 basis points to 9.87 percent, data from state debt office showed.

The debt office sold 27.5 billion rupees of 3-month bills after offering 35 billion rupees.

The 6-month yield rose 09 basis points to 9.95 percent with 37.23 billion rupees of bills sold, after offering 47.5 billion rupees.

The 12-month yield went up 03 bis points to 10.05 percent, with 39.5 billion rupees of bills sold and 40 billion rupees offered.

Sri Lanka’s Treasuries yield have come down sharply in recent weeks.

The trend was partly helped by some banks which were earlier not buying into bills, starting to buy them.

Deposit in the central banks overnight window (private sector sterilization) has come down from around 200 billion to around 130 billion rupees in recent weeks.

Sri Lanka’s central bank in the past have triggered currency crises and eventual high corrective rates by not allowing Treasury bill yields to move when up private credit picks up and buying them into the balance sheet.

The resulting forex problems are then blamed on budget deficits (politicians) and current account deficits (mainly imports of the public usually petroleum, gold or cars).

The central bank can still buy Treasury bills outright from banks, term or overnight to inject money, alter rupee reserves of banks and encourage them to overtrade and trigger forex shortages, confidence shocks, capital flight and a second default, critics say.

The central bank recently lifted counterparty limits of standing facilities, which are given at the policy rate without a penalty unlike in countries with greater monetary stability.

In recent weeks the central bank has oversold bills outright and injected money long term and short term, though so far overall net injections have been deflationary. (Colombo/Feb28/2024)

Continue Reading

Sri Lanka stocks close up, retail activity coming in

ECONOMYNEXT – The Colombo Stock Exchange closed up on Wednesday, data on its site showed.

The broader All Share Index closed up 55.29 points, or 0.52 percent at 10,678; while the S&P SL20 Index closed up at 3,056 points, up 0.06 percent, or 1.73 points.

Turnover was at 1.2 billion.

Market participants said that “retail activity is also picking up.”

Hemas Holdings Plc saw large volumes being traded, contributing 90 million to the day’s turnover. The share closed up at 75.00.

Kapruka Holdings Plc announced that it had purchased 197,015 ordinary voting shares of its subsidiary Kapruka e-Commerce (Pvt) Ltd for 13.2 million rupees at 67 a share. The proceeds will be used by Kapruka e-Commerce “to fulfill the IPO objective of launching Kapruka Partner Central, the company said. The share closed down at 6.80.

E B Creasy and Company Plc announced a disposal of investment in its subsidiary, Lanka Special Steels Limited (LSSL) in accordance with the restructuring process of the E B Creasy Group. The Board resolved “to divest its 100% stake represented by 2,138,657 shares in its subsidiary Lanka Special Steels Limited (LSSL), to subsidiary company Laxapana Batteries PLC (Laxapana) for a total consideration of Rs694mn which will be settled in installments. Shares of E B Creasy and Company Plc closed up at 22.00.

Sectors that attracted investor interest were Capital Goods (376mn), Food, Beverage and Tobacco (181mn), and Banks (166mn).

Positive contributors to the indices in the day included Hayleys Plc (up at 82.00), Chevron Lubricants Lanka Plc (up at 104.00), Vallibel One Plc (43.30), and Cargills (Ceylon) Plc (up at 349.75) whose Chairman Ranjith Paige donated 3 million rupees to the ‘Children of Gaza Fund’ earlier today. (Colombo/Feb28/2024).

Continue Reading

Sri Lanka Education Ministry asks schools to keep children out of sun

ECONOMYNEXT – Sri Lanka’s Education Ministry has warned school officials against exposing children to the sun as the Natural Hazards Early Warning Centre issued a heat index advisory.

“As extreme hot weather may rise further today, tomorrow and the next day (Feb 28, 29 and March 1), avoid keeping school students outdoors in high temperatures,” the ministry said in a statement.

With temperatures expected to increase in the next few days, “students in any school in the island will not participate in outdoor sports training activities or sports events”. The Ministry of Education has advised all schools to refrain from engaging in any other external activity.

Instructions have been forwarded to the provincial and regional education authorities to inform principals, and “to proceed according to the series of instructions issued by the Ministry of Health”.

According to the Department of Meteorology forecast, the heat index, the temperature felt on the human body, is expected to increase up to the ‘Caution’ level at some places in the North-western, Western and Southern provinces and Ratnapura District.

A ‘Caution’ level denotes ‘fatigue is possible with prolonged exposure and activity. Continuing activity could result in heat cramps.

ACTION REQUIRED
Job sites: Stay hydrated and takes breaks in the shade as often as possible.
Indoors: Check up on the elderly and the sick.
Vehicles: Never leave children [or pets] unattended.
Outdoors: Limit strenuous outdoor activities, find shade and stay hydrated.
Dress: Wear lightweight and white or light-colored clothing.
(Colombo/Feb28/2024)

Continue Reading