CoPF eases outward investment rules, tightens SOE borrowing under new reforms

• Permits listed companies to invest up to $ 750,000 abroad, up from $ 500,000, and unlisted firms to invest up to $ 200,000 from $ 150,000 cap
• Companies keen to invest more can borrow up to $ 2 m from foreign sources subject to CBSL oversight, while investments over $ 2 m require special regulatory approval
• All outward investments must be routed via designated Outward Investment Account in Sri Lanka
• CoPF approves regulation under Section 35 of Public Debt Management Act, introducing mandatory stress tests for SOEs seeking international loans with sovereign guarantees; aims to curb excessive SOE borrowing and enhance fiscal accountability
• Officials reveal SL has used 5% of 7.5% of GDP borrowing ceiling, leaving limited 2.5% headroom for future development finance

In a bid to promote cross-border expansion of Sri Lankan enterprises, the Committee on Public Finance (CoPF) has approved updated guidelines on outward investments, raising investment thresholds and simplifying processes for local companies to venture overseas. 

At the time, the Committee imposed tighter controls on State-owned enterprises (SOEs) borrowing under the Public Debt Management Act, indicating a push for stronger fiscal discipline.

The new regulations, formalised under Section 22 of the Foreign Exchange Act, No. 12 of 2017 and published via Gazette Extraordinary No. 2441/14 of 18 June 2025, were approved at the Committee’s meeting on 29 July chaired by MP Dr. Harsha de Silva.

Under the revised framework, listed companies are now permitted to invest up to $ 750,000 abroad, up from the $ 500,000 threshold earlier, whilst unlisted companies may invest up to $ 200,000, up from the previous $ 150,000 cap. Companies wishing to invest beyond these limits can now borrow up to $ 2 million from foreign sources, subject to Central Bank of Sri Lanka (CBSL) oversight, while investments exceeding $ 2 million will require special regulatory approval.

All such outward investments must be routed through a designated Outward Investment Account (OIA) in Sri Lanka and licenced banks have been granted general permission by the CBSL to facilitate transactions to eliminate red tape and improve investor agility.



CBSL officials present at the meeting noted that the reform is designed to support Sri Lankan businesses, particularly in the technology and software sectors, to scale internationally without being forced to relocate due to restrictive capital controls. 

They also clarified that short-term supplier credit on DA (Documents against Acceptance) terms will remain classified as a current account transaction with no additional restrictions.

The CoPF approved a key regulation under Section 35 of the Public Debt Management Act, No. 33 of 2024 (Gazette Extraordinary No. 2443/14 of 30 June 2025) which introduces mandatory stress tests for SOEs seeking international loans backed by sovereign guarantees. 

The risk assessment tool, developed in line with International Monetary Fund (IMF) guidelines, will determine eligibility and pricing, factoring in risk premiums in addition to lender interest rates. This is expected to curb indiscriminate SOE borrowing and promote accountability in public finance.

Officials informed the Committee that Sri Lanka currently operates under a 7.5% of GDP borrowing ceiling, of which around 5% has already been used, leaving a narrow 2.5% fiscal space for future development financing.

The Committee also inquired on the BYD vehicle issue, where over 1,000 cars remain detained at the Port. CoPF Chair Dr. de Silva questioned Custom officials about allegations against one of the country’s major companies. Customs officials indicated investigations into suspected engine capacity understatement to avoid taxes, as duties are calculated based on engine capacity. While investigations continue, the Chair expressed concern about potential diplomatic implications, urging authorities to apply international standards rather than local investigations that may not meet international benchmarks.

The Committee also discussed proposed improvements to the Gambling Regulatory Authority Bill, with the Committee advocating for the inclusion of the National Lotteries Board (NLB) and Development Lotteries Board (DLB) within the regulatory framework, noting that lotteries constitute gambling and should not be excluded.

The officials present also stated that concerns pertaining to e-commerce platform taxation have been resolved. They stated that operations are now flowing smoothly following earlier delays caused by the switch back to Harmonised System (HS) code-based taxation.