Sri Lanka Relaxes Rules for Capital Inflows, Restricts Outflows

Source: Regulation Asia Duruthu E Chandrasekera, Regulation Asia 2020-07-18

Sri Lanka has increased the amount of foreign currency that can be physically brought into the country to be deposited into a ‘Special Deposit Account’.

The CBSL (Central Bank of Sri Lanka) on Monday (13 July) further relaxed rules on SDAs (Special Deposit Accounts)in a bid to induce greater foreign direct investment inflows to support a national effort to overcome the effects of Covid-19.

The SDA scheme was announced in April, prescribing Sri Lankan nationals and non-nationals alike, fund and other corporate bodies, and “any other well-wishers” as eligible applicants. Applicants were invited to open 6- or 12-month fixed deposit accounts in any currency, with any licensed bank in Sri Lanka, with a minimum tenure of six months.

So far, the scheme has attracted USD 87 million into Sri Lanka.

In a media release, the CBSL said that the government has taken further measures to encourage SDA account opening.

Among the measures, the amount of foreign currency that can be physically brought into the country to be deposited into an SDA before 7 October has been raised, from USD 10,000 to USD 15,000.

This is subject to conditions that the foreign currency is “legitimately acquired” and the proper declarations are made.

Under the new measures, residents and non-residents alike can also obtain bank loans denominated in LKR against their SDA holdings.

Separately, CBSL on Thursday (16 July) has restricted outward remittances for a further six months to preserve foreign currency reserves.

In a notice, the CBSL said it has suspended the general permission granted to make outward remittances for overseas investments by Sri Lankan residents.

However, the policy change excludes investments financed by foreign currency loans obtained overseas and those made to fulfill overseas regulatory requirements, among other exemptions which allow remittances up to USD 20,000.

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

CBSL

Sri Lanka Relaxes Rules for Capital Inflows, Restricts Outflows

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