Sri Lanka to extend capital controls by further six months

The Sri Lankan government has extended capital controls for six months to continue rebuilding the country's foreign exchange reserves. President Ranil Wickremesinghe, Minister of Finance, Economic Stabilisation, and National Policies, sought approval from the Cabinet of Ministers to extend the validity period of the order issued under Section No. 22 of the Foreign Exchange Act No. 12 of 2017.

 

 

While the country's foreign exchange reserves have increased to over US$3.5 billion from near-zero levels due to remittances and tourism inflows, Cabinet Spokesperson Bandula Gunawardena noted that they have yet to reach a satisfactory level to lift the capital controls. According to Gunawardena, the country maintained around US$8.2 billion in official foreign reserves during the pre-crisis period.

 

 

The Central Bank has recommended extending the capital controls for six months, as the current rules expire on June 30, 2023. Gunawardena stated that the government is expected to reconsider the decision on capital controls after completing debt restructuring negotiations, which are targeted for September.

 

 

Under the Foreign Exchange Act No. 12 of 2017, the government has imposed restrictions on outward remittances related to certain capital transactions and mobile transfers since April 2020, based on the Central Bank's recommendation. The current capital controls also limit foreign investments by local companies and individuals while reducing the amount of money citizens can carry when migrating to another country.