Wednesday, February 24, 2016

Sri Lanka's Colombo financial centre to be governed by British law: Finance Minister

ECONOMYNEXT - A planned 'Colombo International Financial Centre' will be governed by British law and Sri Lanka's exchange control laws would also be relaxed, Finance Minister Ravi Karunanayake said.

"We want to position Sri Lanka as a mini-financial centre," Karunanayake told a business forum in Colombo.

"That is why we want to have a Colombo International Financial Centre, showcasing the Hong Kong model with a British legal system."
Dubai's International Financial Centre also has similar provisions.

Karunanayake said Sri Lanka exchange controls would be relaxed.

"In the next couple of months you will see the exchange controls being completely opened up - not to the extent of the capital markets being opened up - because you need a certain safety when we integrate ourselves," he said.

 "But we need to ensure that we integrate with the world."

Sri Lanka tightened exchange controls progressively after the establishment of a central bank in 1951 as deficit financing with printed money caused 'foreign exchange shortages,' and currency collapses.

Analysts have pointed out that Sri Lanka's central bank will have to be reformed to prevent currency collapses and high inflation.

Hong Kong has free capital mobility because it has a currency board without a true policy rate and not a money printing central bank like Sri Lanka which de-stabilizes the balance of payments by purchasing Treasury bills and injecting excess demand.

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