The government has decided to extend capital controls by further six months limiting the movement of foreign currency out of the country in order to continue to re-build the country’s foreign exchange reserves.

President Ranil Wickremesinghe in his capacity as the Minister of Finance, Economic Stabilisation and National Policies sought the approval of the Cabinet of Ministers on Monday to take the required measures to extend the validity period of the order issued under Section No. 22 of the Foreign Exchange Act No. 12 of 2017 for another 6 months from 30th of this month.

Although, the country’s foreign exchange reserves have risen to over US$ 3. 5 billion from near zero levels driven by remittances and tourism inflows, Cabinet Spokesperson Bandula Gunawardena pointed out that they have not still grown to respectable levels to lift the capital controls. 

“During the pre-crisis period when the economy was booming, we managed to maintain around US$ 8.2 billion in official foreign reserves,” he noted.

Hence, he said that Central Bank has recommended extending the capital controls by further six months which was set to expire on June 30, 2023.

Upon the completion of debt restructuring negotiations targeted in September, the government is expected to reconsider the decision on capital controls, according to Gunawardena.

Under the Foreign Exchange Act No. 12 of 2017, the government has restricted outward remittances related to certain capital transactions and mobile transfers since April 2020 on the recommendation of the Central Bank.

Under the current capital controls, the government has restricted foreign investments by local companies and individuals while lowering the amount of money that citizens can carry when they migrate to another country.