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Saturday April 20th, 2024

Sri Lanka tightens forex controls after printing money

ECONOMYNEXT – Sri Lanka has tightened controls on foreign exchange outflows for three months as the rupee slid in the wake of rate cuts and ‘helicopter drop’ style liquidity injections made to keep rates down as the country is trying to fight off an Coronavirus outbreak.

Sri Lanka has suspended all remittances by from business foreign currency accounts or personal foreign currency accounts are suspended for three months, Finance Minister Mahinda Rajapaksa said in an order issued through a gazette notice.

Sri Lanka has also suspended a general permission given for residents to invest a limited sum of money abroad though outward investment accounts.

However any foreign investment made through a foreign loan or investments made to comply with a foreign regulator would be permitted.

The larger amounts could also be sent out for regulatory purposes with the specific approval of the central bank.

Sri Lanka has made unprecedented liquidity injections in March and is continuing in April. The rupee has fallen from 182 to the US dollar close to 200 rupees.

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Sri Lanka makes fresh helicopter drop of liquidity as nation fights off Coronavirus

Sri Lanka has also halted imports of some goods and people have been advised to grow vegetables ahead of more controls.

The full statement is reproduced below:

BY virtue of the powers vested in me under Section 22 of the Foreign Exchange Act, No. 12 of 2017, I, Mahinda Rajapaksa, Minister of Finance, Economic and Policy Development do by this Order,

i. suspend making payments through Outward Investment Accounts for the purpose of making investments in overseas by persons resident in Sri Lanka under general permission granted in the Schedule I of the Foreign Exchange (Capital Transactions in Foreign Exchange carried on by Authorized Dealers) Regulations No. 1 of 2017 published in the Extraordinary Gazette Notification No. 2045/56 dated November 17, 2017, excluding :

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

b. investments to be made to fulfill the regulatory requirement in that country provided that, the Head of Department of Foreign Exchange is satisfied with the fulfilment of such requirement;


ii. suspend any outward remittances other than the remittances on current transactions through Business Foreign Currency Accounts or Personal Foreign Currency Accounts held by persons resident in Sri Lanka;

iii. suspend the repatriation of funds under the migration allowance through Capital Transactions Rupee Accounts by the emigrants who have already claimed migration allowance under the general permission stated in the Schedule IV of the Foreign Exchange (Capital Transactions in Foreign Exchange carried on by Authorized Dealers) Regulations No. 1 of 2017 published in the Extraordinary Gazette Notification No. 2045/56 dated November 17, 2017;

iv. limit 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 ;

v. the Monetary Board shall have the authority to grant permission in terms of the Section 7(10) of the Foreign Exchange Act for the investments on case by case basis which exceeds the limits specified in the general permission granted in the Schedule I of the Foreign Exchange (Capital Transactions in Foreign Exchange carried on by Authorized Dealers) Regulations No. 1 of 2017 published in the Extraordinary Gazette Notification No. 2045/56 dated November 17, 2017 provided that,

a. the proposed investment is to be financed out of a foreign currency loan obtained by the investor from a person resident outside Sri Lanka under the provisions of the Foreign Exchange Act, or
b. b. the proposed investment is to be made to fulfill the regulatory requirement in that country

This order valied for a period of three months from April 2, 2020.

MAHINDA RAJAPAKSA,
Minister of Finance, Economic and Policy Development.
Colombo,

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Sri Lanka discussing giving extra land, water for Chinese oil refinery

ECONOMYNEXT – Sri Lanka is in discussions with China’s Sinopec to give extra land and assure water supplies after the company decided to expand the capacity of a planned oil refinery in Hambantota, Energy Minister Kanchana Wijesekera said.

“There are concerns on how the water supply is going to be provided for the refinery,” Minister Wijesekera told reporters Friday.

The refinery will need more land and also revise conditions in a Board of Investment agreement, he said.

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Sinopec to double capacity of new refinery in Sri Lanka’s Hambantota

Recommendations and decisions from Sri Lanka’s side had already been sent and Sinopec is expected to revert back in May.

“We are hoping to sign the agreement once everyone has agreed,” Wijesekara said.

The principle agreements are expected to be signed by June, he said.

The refinery could sell up to 10 percent of its output in the domestic market.

“There is no commitment by the government to purchase anything,” Minister Wijesekera said. (Colombo/Apr19/2024)

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Sri Lanka rupee closes weaker at 302.00/50 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 302.00/50 to the US dollar in the spot forex market on Friday, down from 301.50/302.00 a day earlier, dealers said.

There was increased demand for dollars after the central bank bought 715 million dollars from forex markets. In the previous two months it was buying on average about 200 million US dollars, leaving market participants and bank in a ‘oversold’ position.

There were some official dollars sales Friday dealers said.

READ Sri Lanka rupee quoted wide to US dollar as peg inconsistencies flare up

Bond yields were broadly steady.

A bond maturing on 15.12.2026 closed at 11.30/40 percent down from 11.35/40 percent.

A bond maturing on 15.09.2027 closed at 11.95/12.05 percent up from 11.90/12.05 percent.

A bond maturing on 15.12.2028 closed stable at 12.15/25 percent.

A bond maturing on 15.09.2029 closed stable at 12.30/40 percent.

A bond maturing on 01.10.2032 closed stable at 12.40/50 percent. (Colombo/Apr19/2024)

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Sri Lanka stocks close down, banks trade down

ECONOMYNEXT – The Colombo Stock Exchange closed down on Friday, data on its site showed.

The broader All Share Index closed down 0.38 percent, or 44.80 points, at 11,753; while the S&P SL20 Index closed down 0.53 percent, or 18.46 points, at 3,456.

Turnover was at 1.4 billion. The diversified financials (Rs366mn) and banks (Rs266mn) sectors continued to see selling pressure.

“This was possibly due to uncertainty around the bond discussions,” market participants said.

With the exception of Sampath Bank Plc (up at 77.50) all other banks traded down in the day. Commercial Bank of Ceylon Plc was down at 104.50, Hatton National Bank Plc was down at 188.50, and DFCC Bank Plc was down at 77.00.

LOLC Finance Plc saw the most trades and closed up at 6.40. Another LOLC company, Browns Investments Plc, also saw high traded volumes and closed up at 5.60.

Softlogic Capital Plc was up at 7.00, and Softlogic Holdings Plc was up at 11.20. A trading suspension imposed on SHL.N0000 was lifted effective today as the company submitted the annual report for the year ended 31st March 2023.

However, shares of the Company will remain in the Watch List “due to Qualified Audit Opinion and Emphasis of matter on going concern in the Independent Auditor’s Report in the Audited Financial Statements for the year ended 31st March 2022.”

Dialog Axiata Plc, which announced its merger with Bharti Airtel Thursday, saw its share price close up at 11.90.

“There was some traction on index heavyweights,” market participants pointed out.

Top contributors to the APSI included Aitken Spence Plc (up at 134.50), Ceylon Tobacco Company Plc (up at 1,245.25, and Lion Brewery (Ceylon) Plc (up at 1,048.50).

There was a net foreign inflow of 5 million. (Colombo/Apr19/2024)

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