$ 1 m guarantee cap holds back Sri Lankan builders in Africa

Friday, 2 October 2026 00:00 - - {{hitsCtrl.values.hits}}

Local firms may guarantee loans to overseas ventures up to $ 1 m or 50% of net assets
CBSL and ministries agreed in principle to raise limit, but deferred it under June market stress
Construction firms say cap bars them from bidding for larger projects
Committee member proposes case-by-case approvals within national ceiling of about $ 10 m
CBSL has approved investments above $ 2 m in Kenya and Bangladesh case by case

Sri Lankan construction and engineering firms seeking larger contracts in Africa will remain constrained by a $ 1 million cap on guarantees for their overseas ventures, after the Central Bank of Sri Lanka (CBSL) deferred a planned increase it had agreed in principle.

Under Foreign Exchange Regulations No. 01 of 2026, approved by Parliament’s Committee on Public Finance (CoPF) on 24 September, 2026, a Sri Lankan company may provide corporate or bank guarantees for loans raised abroad by its overseas investee company. The guarantees are capped at $ 1 million or 50% of the local company’s net assets. The facility allows companies to support overseas operations without remitting cash.

A CBSL official said construction and engineering firms had repeatedly requested a higher limit, as the cap prevents them from taking on larger projects. The CBSL and the relevant ministries had agreed in principle to raise it, and the increase was proposed for this regulation. It was dropped because the regulation was issued around June, when markets were under stress. The official said the CBSL would consider the increase favourably in future.

A Committee member said three or four Sri Lankan construction companies were winning business, particularly in Africa. He proposed that the CBSL approve guarantees for these firms case by case, within an aggregate national ceiling of about $ 10 million.

A CBSL official said the Bank agreed the limit had to be raised. Both corporate and bank guarantees are permitted, as under the previous regulation.

The guarantee cap sits alongside the cap on direct outward investment, which remains at $ 750,000 or 20% of net assets, whichever is lower, for listed companies and $ 200,000 for non-listed companies. Companies may invest up to $ 2 million if the excess is financed through foreign borrowing or equity raised abroad. A CBSL official said investments exceeding $ 2 million had been approved case by case in Kenya, Bangladesh and other countries.