News
As rupee plunges, Govt. takes urgent measures to protect foreign reserves and stabilise rupee
As the Sri Lanka rupee hit the 200-mark in relation to the US Dollar this week for the first time, urgent measures to protect foreign reserves and stabilise the rupee will include delays in payments due on Sri Lanka Development Bonds (SLDBs) – a debt denominated in US dollars by the government, until next year and to differ the repayment of foreign currency loans taken by local private banks, the Treasury and the Central Bank have decided.
A senior Treasury official said the moves would help the government to repay foreign loans and meet commitments for International Sovereign Bonds — debt securities issued by the government to raise capital for spending needs. For this year, the total repayments due account for about US$ 4.1 billion.
He said the government was planning to arrange for long-term flexible loans which would serve as another measure.
Among the repayments due is a government commitment to make US$ one billion as a Sovereign Bond payment.
Sri Lanka Development Bond Returns are totally tax free in Sri Lanka, enjoy higher returns than that of a standard deposit and do not involve exchange rate risk.
Those eligible to invest are citizens of foreign states whether resident in Sri Lanka or outside Sri Lanka, Sri Lanka citizens who have made their permanent abode outside Sri Lanka, Sri Lanka citizens who have gone overseas for employment or to set up business or in a profession and Sri Lanka citizens who have dual citizenship provided that those citizens substantiate that their permanent place of abode is outside Sri Lanka.
For Board of Investment companies, SLDB investment should be from their export income while companies registered under the Regulation of Insurance Industry Ac, investment should be from funds from their Special Foreign Currency Accounts.
The moves come in the wake of the country’s Foreign Reserves dropping to US$ 4.5 billion.
The SLDB auction raised USD 24.82 million. At the auction, maturities offered varied from 1 year 2 months to 4 years 2 months at a fixed rate of 6.69 percent to 6.82 percent.
Finance Ministry sources said the next few months were “crucial” in maintaining the foreign reserves and protecting the rupee deprecating even further against the US dollar.
The Sri Lankan rupee was last quoted at 199 against the US dollar on Friday.
In view of the depleting foreign reserves the Central Bank has refrained from intervening to stabilise the rupee. Instead, it will be looking at further improving exports and increasing remittance while awaiting investments through the Port City project. The Government gazetted the Colombo Port City as a Single Window Investment Facilitator last week and declared it as a Special Economic Zone.