The Central Bank says its latest decision to tap the Sri Lankan diaspora will provide more stable inflows of foreign funds. The financial regulator says it will work with the Ministry of Foreign Affairs to leverage Sri Lanka’s foreign missions, to pull in foreign exchange from an estimated 1.5 million Sri Lankans working and living all over the globe.
“We expect this to be a much more stable investment category. Because although foreign nationals may pull-out investments suddenly, we do not expect the Sri Lankan diaspora to behave that way,” said the Additional Superintendent of Public Debt at the Central Bank, Chandra Wijayasekera.
Last year, between mid-September and year-end, Sri Lanka’s limited foreign reserves dipped suddenly when foreign investors in Treasury-Bills/Bonds bailed out on Sri Lanka to the tune of US $ 407 million, precipitated by the global financial crisis.
The Central Bank did not say how much it hoped to raise in 2009 by opening up the rupee denominated T- Bill and T-Bond market for Sri Lankans living abroad.
But Mr Wijayasekera said “We expect a very good response based on the inquiries we have already got and also because our interest rates are higher than in other countries.”
The interest rates in Sri Lanka for T-Bills/Bonds currently range from 17.31% to 19.10% from 3 months, to 1 year. But the six banks, that act as intermediaries for these investments, can charge a maximum 1.5% out of the interest rates, to cover their costs.
But investors will not have to pay any taxes on earnings from these investments, except for a 10% withholding tax at the time of initial purchase of the T-Bills/bonds.
They have even been exempted from stamp duty on local documentation. Exchange control laws have also been relaxed and investors can pull-out their money in foreign currency or Sri Lankan rupees.
Sri Lankans that are permanent residents overseas, Sri Lankan citizens employed overseas or have set up businesses abroad, Sri Lankans with dual citizenship, Sri Lankan professionals living in Sri Lanka or abroad that earn in foreign currency, and banks acting in a fiduciary capacity on behalf of the above categories, are all eligible to invest. The six banks appointed to handle these investments are the Bank of Ceylon, Commercial Bank of Ceylon PLC, National Savings Bank, NatWealth Securities Ltd., People’s Bank and Sampath Bank.
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