Attractive investments for expatriates
To reverse the deterioration of foreign reserves as the short term
foreign investments are being withdrawn by investors, the Government
last week sought investments from the Sri Lankan diaspora and the
migrant working community. Central Bank of Sri Lanka last week opened
Rupee denominated treasury bills and treasury bonds market for Sri
Lankans living abroad at attractive returns and other benefits.
The Governor of the CB Ajith Nivard Cabraal said that with the
present global financial crisis these new instruments will be more
attractive investments for Sri Lankans living abroad.
These are gilt-edged securities for which the interest rates are
determined by the market and therefore high and tradable in the
secondary market. The capital gains are fully repatriable and joint
investments are allowed. The only tax is 10% withholding tax charged at
source and there is no stamp duty. The funds will be deposited in a
sinking fund in the CB to assure the safety and repayment of the
investments, the CB said.
Explaining the back ground for the issue of these new instruments
Cabraal said that from November last year investors in the West have
withdrawn around US$ 1.2 trillion investments out of the Asian region
after the financial crisis intensified. As a result Sri Lanka lost US$
400 million investments and our reserves depleted. To improve our
reserves we thought of new approaches and this is one of them, he said.
CB expects to raise US$ 500 million this year from this new drive.
The Sri Lankan migrant workers have brought US$3 billion foreign
remittance last year.
The Deputy Governor of the CB W.A. Wijewardane said that this is also
a move towards relaxing the capital account. We opened our current
account in 1993 but it took long years to open our capital account. We
liberalised the capital account in 2007 and as a result received US$ 650
million investments to improve the foreign reserves. There is a
perception that opening of the capital account is unsafe, because
capital flows out. This is a myth and when the capital account is opened
the capital flows both ways, in and out, he said.
Wijewardena said that the new instruments will be more attractive
investments for expatriate Sri Lankans because in the global markets the
interest rates are low as 0-2% today and in some countries it is
negative due to depreciation of currencies and high bank charges. During
the last three years the Sri Lankan rupee has depreciated only by 3.4%,
CB will launch an extensive marketing campaign around the world to
attract expatriate Sri Lankans that is estimated over 1.5 million. The
campaign will be carried out in five zones Asia (including Australia and
New Zealand), two zones in the Middle East, Europe and the North
America. The campaign in each zone is led by a senior CB official and it
includes road shows in 19 cities in 11 countries.
Five lead managers; Bank of Ceylon, Commercial Bank of Ceylon PLC,
National Savings Bank, NatWelth Securities Ltd, People's Bank and
Sampath Bank, have been appointed to market the products.