Sri Lankan government allows state owned enterprises to borrow from foreign sources
State Minister of Finance in Sri Lanka Eran Wickremeratne has informed parliament last week that state owned enterprises in the country have been allowed to borrow from foreign sources without the lender opening an account inside the island.
The government’s decision has been enabled following regulations approved by parliament last week.
Firms where the government owns over 50 percent of shares have had practical difficulties in borrowing abroad due to current requirements, Wickremeratne has said.
Under a change to sector 29 of Sri Lanka’s Foreign Exchange Act, a state owned enterprise could borrow abroad after getting approval of the line ministry without the proceeds coming through a Inward Investment Account of the lender.
But all borrowings have to be reported by the Department of External Resources, Department of Public Enterprises and the Department of National Budget, to the Department of Foreign Exchange within a month of the loans coming into Sri Lanka.
According to reports, Sri Lanka has exchange controls due to the operation of a soft-pegged exchange rate, where the central bank prints money to control interest rates (policy rate) boosting domestic credit, and also try to control the exchange rate at the same time, which is not practically possible.
OSL take:
The new amendment to foreign exchange legislation enabling Sri Lanka’s state owned enterprises to borrow monies from foreign sources would result in the expansion of operations in many state owned enterprises. This would result in more open as well as direct transactions between foreign business/financial institutions and Sri Lankan state owned enterprises. Therefore, foreign businesses could explore opportunities to business with Sri Lankan state owned enterprises.
| Article Code : | VBS/AT/14052019/Z_1 |