CB offers zero-cost swap facility to private sector currency borrowers – Business News


The central bank yesterday announced a number of measures encouraging the country’s private sector to borrow from offshore sources, as the debt-ridden island nation remains hungry for dollars.

Here is the full press release issued by the Central Bank.

“The Central Bank of Sri Lanka (CBSL), with the aim of encouraging foreign currency inflows into the country, invites the private sector to seek ways of raising offshore financing by taking advantage of its strengths, with the agreement of the Minister of Finance and in accordance with the provisions of Foreign Exchange Law No. 12 of 2017 (FEA).

In this regard, to hedge the foreign exchange risk of offshore borrowings, a zero-cost swap facility would be made available by CBSL to private sector foreign currency borrowers for the term of said borrowing, which could be reviewed and renewed annually.

Alternatively, the private sector could invest US dollar funds raised overseas in Sri Lanka Development Bonds (SLDBs), corresponding to the term of the overseas loan, in accordance with the weighted average fixed rate / at the weighted average margin determined in immediately preceding SLDB auctions or at mutually agreed upon levels through designated agents (ADs) appointed to market SLDBs.

In terms of general authorization granted under the regulations made under the FEA, companies incorporated in Sri Lanka under the Companies Act, No. 7 of 2007 are allowed to obtain loans / issue debt securities from / to non-residents in accordance with the procedures. introduced under these regulations.

In the event that companies incorporated in Sri Lanka wish to pledge local assets and issue corporate guarantees to secure loans to be obtained abroad, these requirements may be met in the form of special authorization under FEA provisions upon written request to the Director. , Department of Foreign Exchange.
In addition, private sector entities that borrow abroad may sublend these funds to their affiliates in Sri Lanka, subject to the terms and conditions specified in the order issued under section 4 (2) (c ) of the FEA published in the Government Gazette. (Extraordinary) Notification n ° 2229/5 of May 25, 2021.

Any legal person interested in the above can access all relevant regulations and ordinances published in Government Gazette (extraordinary) notifications via www.dfe.lk/downloads. In addition, they can contact their banker or the Foreign Exchange Service for further information on the foreign exchange regulations in force.

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