ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange (CSE) will introduce a measure to facilitate local companies to raise funds in foreign currencies, a CSE official said, as the island nation is facing a forex crisis after the central bank’s excess money printing.

Sri Lankan importers are struggling to get adequate US dollars as they cannot open letter of credit with local banks due to forex shortage as the country’s foreign currency reserves plummeted over 50 percent last year alone.

The CSE’s new move, which was approved last week by the regulator Securities and Exchange Commission (SEC) will allow Sri Lankan companies seeking to fund foreign currency projects to raise capital in offshore currencies by listing at the Exchange, a CSE official said.

“Companies which have earned over 50 percent of their revenue in foreign currencies in the last three years with a minimum revenue of 5 million US dollars are eligible to use this option,” the source told EconomyNext.

Though the central bank banned many imports last year, the 2021 import bill hit a three-year high as lower interest rates amid excess money printing made imports cheaper.

The move comes at a time the central bank has been struggling to raise dollar loans to boost its reserves, which fell by more than a quarter in January.

Analysts blame the central bank’s parallel currency exchange for the lack of dollar inflows from remittances and exports.

Though the central bank has fixed the exchange rate at around 200 rupees per dollar, the US currency is sold at around 250 rupees in the grey market.

Sri Lanka is unable to tap international capital market for foreign currency loans as global rating agencies have downgraded its credit rating to its worst in the history due to risks faced in foreign debt repayment.

The central bank, however, has repeatedly said it can manage foreign loans and will not default any.