Sri Lanka is to implement nearly a dozen financial liberalisation measures in an effort to sustain a post-conflict economic boom, Central Bank Governor Ajith Nivard Cabraal said.
The Governor told the UK Financial Times that the country’s reform “roadmap” would be “almost 100 per cent” completed in the forthcoming budget.
The reforms are intended to loosen controls on outward capital flows and pave the way for easier inward investment. They include allowing foreigners to invest in local currency corporate debentures and open business offices and bank accounts.
Residents will be allowed to open bank accounts abroad and invest in foreign listed companies, while domestic companies will be allowed to list overseas and insurance companies will be able to invest part of their reserves in foreign assets.
The Central Bank Governor said the bank’s financial reform programme for 2011, which is to be published in January, would include “exciting” measures “for investment to flow in fast, for investment to go in the directions that we need”.
The Central Bank is believed to be preparing to allow foreigners to invest in the corporate bond market, which would deepen the investor base in the primary market and help improve thin liquidity in the secondary markets.
The Governor said he expected to see strong growth in the corporate bond market. It has lagged well behind both the sovereign debt market and equity capital raisings, which have shown robust growth over the last year.
“It will happen soon, and when it happens there will be a substantial appetite for it,” he said in an interview in Singapore. “For a while we had very few initial public offerings, but now more and more are coming forward.”
He said average GDP growth of eight per cent a year was achievable over the next five years, faster than some independent forecasters expect. The Asian Development Bank is predicting growth of 6.5 per cent this year and seven per cent in 2011.
The Governor also said that the Central Bank was holding between 10 per cent and 20 per cent of its reserves in gold, which it started to buy in 2009. He said the bank kept part of its reserves in a trading account, and had made profits on sales.