Sri Lanka to push for investments beyond one year through Special Deposit Accounts
The government of Sri Lanka is reportedly looking at drawing investments beyond one year via the Special Deposit Accounts (SDA) scheme which offers a higher interest rate.
The SDA scheme has been in force since April last year and is limited only to six months and one year.
According to reports, as per the last disclosure by the Central Bank of Sri Lanka, the scheme has attracted foreign currency deposits worth US$ 360.3 million by April 2021 and SDAs can be opened in any licenced commercial bank or the National Savings Bank.
Under the existing provisions, it is possible to reinvest an SDA with a term of six or 12 months and award additional interest on such SDAs. However, there is no provision to pay an additional interest rate for SDAs that are reinvested for a period of more than 12 months, local media reports stated.
To facilitate this, Sri Lanka’s Cabinet of Ministers has reportedly approved a proposal by the country’s Prime Minister and Finance Minister Mahinda Rajapaksa, to make an order in terms of Section 7 (1) of the Foreign Exchange Act No. 12 of 2017, including the necessary provisions for that, and to submit such orders to Parliament for approval.
An SDA for six-month deposits gets one percentage point per annum above the normal rate, and for 12-month deposits gets two percentage points per annum above the normal rate and are freely convertible and remittable outside Sri Lanka upon maturity. SDAs will not be subject to procedural requirements of Foreign Exchange Regulations published in Gazette Notification No. 2045/56 dated 17.11.2017 and is also permitted to transfer maturity proceeds into an Inward Investment Account or a Personal Foreign Currency Account, if the account holder is eligible to open or currently maintains such an account, local media reports further stated.
SDAs can be opened either in any of the 15 designated foreign currencies or Sri Lankan Rupees, and also a joint account. The 15 designated currencies are Australian Dollar, Canadian Dollar, Chinese Renminbi, Danish Krone, Euro, Hong Kong Dollar, Japanese Yen, New Zealand Dollar, Norwegian Krone, Pound Sterling, Singapore Dollar, Swedish Krona, Swiss Franc, Thai Baht and US Dollar.
Sri Lanka’s economy has shown great resilience through the years and is once again on the path to recovery after facing the impact of the global Covid 19 pandemic. The government of Sri Lanka is engaged in an aggressive development programme and improving the ease of doing business environment in the country. Given Sri Lanka’s geographical positioning in the Indian ocean and the many trade agreements as well as trade concessions enjoyed by the country have placed the island as an emerging business/investment destination in the South Asian region. Sri Lanka therefore is fast becoming an attractive business/investment destination in the region. Even amidst the Covid pandemic, many key economic sectors in the country have shown a positive growth momentum. Foreign businesses/investors could therefore confidently explore business/investment opportunities in Sri Lanka.
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