COLOMBO, May 28 (Reuters) - Sri Lanka will allow foreigners to invest in unlisted bond issues as of Wednesday, the central bank said, as inflows into local stocks and government securities dry up.
Currency dealers cautiously welcomed the move.
The central bank said in a statement that the move, along with a package of measures to relax the $67 billion economy's foreign exchange regulations, is expected to "further enhance the external competitiveness of Sri Lanka in the global market".
Foreign investors can already invest in bond issues listed on the exchange.
"It's good that they (companies) can have access to low-cost funds," a currency dealer said on condition of anonymity. "But the country could be vulnerable to external shocks. We are just trying to export debt."
Inflows into government securities have been on the decline amid lower foreign buying into the island nation's stock market.
Foreign inflows into government treasury bills and bonds fell 60 percent to $570 million in the first quarter of 2014 compared with $1.44 billion in the same period last year as yields on local government securities dropped.
Foreign investors have bought a net $14.11 million worth of shares so far this year.
The central bank has absorbed more than $400 million so far in 2014 to prevent sharp gains in the rupee
($1 = 130.4000 Sri Lanka Rupees)
(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Hugh Lawson)
((shihar.aneez@thomsonreuters.com)(+94-11-232-5540)(Reuters Messaging: shihar.aneez.thomsonreuters.com@reuters.net)(twitter:@shiharanee z))
Keywords: SRI LANKA FOREX
