Hon. (Dr.) Anil Jayantha - Minister of Labour and Deputy Minister of Finance and Planning

Hon. Presiding Member, thank you for the opportunity. The regulation under the Foreign Exchange Act, No. 12 of 2017, approved by the Cabinet, is presented today for Parliament’s approval. I will briefly explain its key features and relevance to our current economic context and governance. Any country’s economy has an external sector — its trade and financial dealings with the rest of the world. When we assumed office, two areas had acute stress: the external sector — reflected in depleted reserves — and public finance — insufficient revenue to sustain Government functions. As a result, certain restrictions had been imposed on the external sector. The regulation before you signals the stability we achieved by 2025 and seeks to carry that forward. A country can sustain reserves in two basic ways. One, by suppressing outflows — restricting imports and external payments — something you do only in an emergency. But then growth stalls and investor confidence evaporates. The better path is to open the external sector in a calibrated manner and expand the economy. Accordingly, earlier restrictions were progressively eased through gazette notifications, typically valid for six-month periods. The special Gazette No. 2467/67 now seeks to extend those relaxations for a further six months. In addition, we introduce two key new relaxations to support business expansion and investment. 1) For Business Foreign Currency Accounts (BFCAs) — accounts held by investors, businesses and exporters in foreign currency — we allow funds earned prior to the 2021 restrictions to be used up to a higher limit. The utilisable cap is increased from USD 200,000 to USD 500,000 specifically for investment purposes — in equity, companies and capital projects. The Central Bank will conduct proper review, post-audit and monitoring. 2) For Personal Foreign Currency Accounts (PFCAs), the utilisation threshold is increased from USD 20,000 to USD 25,000. Other existing relaxations will continue unchanged, including permitted transfers such as remittances and transitional allowances through capital accounts. Some may worry about the impact on foreign exchange. These steps are data-driven and designed to protect financial stability. For example, under earlier relaxations, outflows were USD 16.89 million in July–December 2024; USD 14.26 million in January–June 2025; and USD 37.03 million in July–December 2025 — modest sums in context. We expect somewhat higher use now because the BFCA cap is raised to promote capital expansion — exactly what a growing economy needs. Across the banking system, BFCAs and PFCAs together already hold about USD 3.2 billion. We aim to mobilise a prudent share of that for investment and growth. Turning to the broader external sector: Sri Lanka’s imports structurally exceed exports — we import raw materials, consumer goods and capital goods — so we run a trade deficit. But we have managed it by growing exports alongside necessary imports, and by diversifying products and markets through the Export Development Board’s programmes. Apparel remains the top export, with tea and petroleum-related products also significant. On imports, fuel cost about USD 4 billion in 2025. Some tried to stoke baseless fears of renewed fuel shortages citing war-related disruptions abroad. The President this morning set out, with data, our supply, storage expansion and management plans. There is no cause for panic; manufacturing anxiety only disrupts economic recovery and our mission to end poverty. Tourism is a strategic sector in 2026; in 2025 it earned about USD 3.2 billion. Worker remittances — over USD 8 billion in 2025, the highest ever — strengthened reserves. We maintained a positive balance in the overall balance of payments; the current account posted a surplus of about USD 1.7 billion in 2025 — a hallmark of stability. Easing external policies was to expand, not shrink, the economy. After vehicle import liberalisation late in 2024, 52,986 L/Cs worth USD 2,547 million were opened, with 450,735 orders placed, and about USD 1.9 billion flowed out in 2025 for these imports. In September and October, monthly imports exceeded USD 2 billion. These indicators show forward momentum, not contraction, and help restore investor confidence — the foundation of sustained growth. On debt restructuring, the new sovereign bonds we issued are now trading in the secondary market near par — instruments that earlier traded at 30–40 cents on the dollar are now close to USD 100 — lowering our financing costs and signalling stability to investors. The platform for investment-led growth is being built. Thank you.