The Central Bank of Sri Lanka (CBS) has introduced measures it says will ease the pressure on the exchange rate and prevent financial market panic due to the coronavirus pandemic.

The bank is suspending imports of certain goods purchased with letters of credit (L/Cs) and other instruments as well as restricting banks' access to the bond market and the amount of foreign currency travellers can obtain.

Motors and non-essentials

Licensed commercial banks and the National Savings Bank are directed by CBS to suspend, with certain exclusions, facilitating imports of all types motor vehicles on L/C terms.

Those banks must also suspend facilitating imports of non-essential goods specified in Banking Act Directions No. 01 of 2020, on L/C, documents against acceptance and advance payment terms.

Bonds and forex

The central bank has also suspended purchases of Sri Lanka International Sovereign Bonds by licensed banks in Sri Lanka.

Additionally, authorised dealers in foreign exchange are only allowed to issue foreign currency notes as travel allowance up to a maximum of US$5,000 or its equivalent in other foreign currencies.

The central bank says it will continue to monitor market developments and take further measures as required, while ensuring adequate liquidity in the market in order to facilitate smooth operations and sustain market confidence during the coronavirus outbreak.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.