Six firms to borrow abroad under CB initiative

In response to the Central Bank’s initiative of allowing companies to borrow abroad, six Sri Lankan firms have already applied to obtain foreign loans for working capital, investment, restructuring or to settle existing foreign currency loans, a senior official of the Central Bank said.

These companies are eligible to seek foreign loans up to $20 million each. He revealed that borrowing costs, including interest rates, should not exceed the prevailing Sri Lanka International Sovereign Bond rate in the secondary market plus 200 basis points. The repayment period shall be at least three years from the date of the final loan disbursement. Local companies seeking foreign loans should submit the agreement with the foreign lending institution along with other relevant documents for the approval of the Exchange Controller, he added.

Local firms have been permitted to obtain foreign loans from foreign banks or finance institutions, multilateral financial institutions, foreign shareholders or parent companies of the borrowing companies, export credit agencies or individual lenders -- subject to furnishing of a confirmation from the banker of his/her country of residence that he/she had been maintaining an account with the said bank at least for a period of one year prior to the date of lending along with evidence that he/she is a tax payer in the country of residence.

The official told the Business Times that Sri Lanka’s foreign exchange transactions have now been expedited with the facilitation of the Exchange Control Department.

Local companies have been permitted to seek foreign loans as major step towards this end, he revealed. Sri Lankan residents, corporates and unincorporated bodies have also been permitted to invest in equity of overseas companies. Sri Lankan residents will be allowed to open and maintain overseas bank accounts and enter into forward contracts in foreign currency. Foreigners can invest in rupee denominated debentures issued by local companies. Local insurance companies are permitted to invest a part of their assets abroad, he said.