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Government introduces measures aimed at restricting capital outflows

The government has already introduced measures aimed at restricting capital outflows, through suspension of outward investment payments until July 2021.

There are also import restrictions of certain goods, as well as prohibiting commercial banks facilitating imports of vehicles.

Outward remittances have been limited, while inward remittances will be exempted from certain regulations and taxes.

A scheme has also been introduced to insure investors against foreign exchange risk, by allowing domestic currency proceeds from qualified investments in treasury bonds to be converted at the same exchange rate as prevailed at the time of initial investment.

Commercial banks are prohibited from purchasing foreign currency denominated Sri Lanka International Sovereign Bonds until end-March 2021, senior CB official said.

A net outflow of foreign investment amounting to USD 10 million was recorded in the rupee denominated 553 million during 2020. The total outstanding exposure of foreign investment in the rupee denominated government securities market remained low at USD 37 million by the end of December, 2020.

There were net outflows of USD 16 million from the secondary market of the CSE in December 2020. On a cumulative basis, the CSE recorded a net outflow of USD 225 million, from both primary and secondary markets, during 2020.

Meanwhile, long term loans to the Government recorded a net outflow of USD 9 million in December 2020.

Gross inflows to the Government amounted to USD 2,002 million in 2020 compared to USD 6,570 million in 2019.

Gross official reserves at end December 2020 amounted to USD 5.7 billion. This level was equivalent to 4.2 months of imports.

Total foreign assets, which consist of gross official reserves and foreign assets of the banking sector, amounted to USD 8.5 billion at end December 2020, providing an import cover of 6.4 months.

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