ECONOMYNEXT – Foreign direct investments to Sri Lanka has fallen to 528 million US dollars up to the third quarter of 2020 down from 793 million US dollars in 2019, central bank data showed.
The data includes direct investments to Board of Investment approved companies, direct investment to listed companies and loans to foreign companies.
In the full year 2019 Sri Lanka is estimated to have received 1,204 million dollars of FDI, down from 2.13 billion US dollars a year earlier.
The FDI was made up of 758 million dollars of equity, inter-company loans and re-investments by existing foreign enterprises. BOI firms had borrowed an additional 445 million dollars.
FDI when invested domestically drive up imports, and contributing to the external current account deficit of Sri Lanka, along with foreign financing of the budget deficit.
However neither net foreign borrowings nor net FDI, contributes to currency pressure or a balance of payments deficits, since all outflows on account of domestic investments financed, in the absence of any money printing.
Sri Lanka’s FDI stock was 13.058 billion dollars in 2019, with China, India, The Netherlands, Malaysia and Singapore among the top source countries.
The stock market had seen an outflow of 225 million US dollars in 2020, up from an outflow of 35 million dollars.
Money printing, reduced interest rates and helped inflate stock prices, ahead of any rate rises in 2021 to contain money printing and forex reserve losses. (Colombo/Feb20/2021)