Sri Lankans allowed to buy foreign equity, foreigners to buy private bonds

Nov 23, 2010 (LBO) – Sri Lankan individuals and unlisted firms will be allowed to buy foreign listed stocks for up to 100,000 US dollars a year and listed companies could buy up to 500,000 dollars worth a year, Central Bank Governor Nivard Cabraal said. A central bank that prints money has to allow the exchange rate to float, or impose exchange controls to continue printing to finance deficits.

Insurance firms would be allowed to invest up to 20 percent of their technical reserves abroad.

Cabraal said in the first year 6.0 percent of the reserves would be allowed, in the second year 12.0 percent and in the third year 20.0 percent.

The central bank is also allowing local firms to sell debentures to foreign buyers.

They can invest in equity and also set up places of business or branch offices,” Cabraal told reporters.

“They do not have to come to the Central Bank. Anything above this limit will require Central Bank permission.

“But up to these limits, foreign exchange dealers (banks) can allow equity purchases. It will be like getting foreign exchange for travel or education abroad.”

Cabraal said the Central Bank was sitting on nearly 7.0 billion US dollars of foreign reserves, which allowed the central bank to loosen