SRI LANKA Colombo, in search of new investments for the port city

The Central Bank of Sri Lanka has approved a new type of bank account for collecting money from abroad. The funds may not be used to import raw materials, but only for development projects. The country hopes to get credit from China.

Colombo () – The Central Bank of Sri Lanka (CBSL) has approved a special type of bank account, the Colombo Port City Investment Account (CPCIA), for transactions in the special economic zone built by China near the port of the capital. .

All Sri Lankan banks have been instructed on two types of CPCIA, one for investors and one for beneficiaries.

These accounts can be used by companies to attract foreign exchange to develop business activities, boost profits or attract capital to the port city of Colombo, known as the “financial city”. The money thus deposited can be kept in foreign currency to invest in the special economic zone.

A spokesperson for the Ministry of Finance explained to that “the accounts can only receive money from abroad. This is the main aspect, in accordance with the spirit of the Colombo Port City Economic Commission Act, which establishes that for any development activity, the money must come from abroad and the funds must be used to invest in the port city”.

Cash cannot be withdrawn to import goods into Sri Lanka; these accounts will only be used for “investments related to business activities in the port city, including capital expenditures for construction or the payment of taxes or services related to the port city.” Payment will be made by electronic transfer.

According to a Commission spokesman, at the moment “the foundations are being laid for the establishment of banks in the Port City”. These institutions will be authorized to carry out “commercial activities within their sphere of competence”. So far, six local banks have expressed interest in the initiative.

Economic and political analysts believe that the Colombo Port City will attract various activities in the future, once it becomes operational.

The authorizations to start operating with banks and financial institutions received “the go-ahead” from the Monetary Council of Sri Lanka (MBSL) and the Ministry of Finance. The condition is that certain pre- and post-operation conditions are respected. For now, the banks that have expressed interest are “reviewing these conditions and are in the process of processing.”

A CBSL spokesperson told that the financial institutions of the port city will be regulated by rules issued by the Commission and not by the CBSL, although the guidelines will be prepared after consultation with the MBSL and the Minister of Finance.

According to a Ministry spokesman, financial experts have carried out comparative studies on several overseas financial cities, for example on “the functioning of the Dubai Financial Services Authority” and several other special economic zones in Malaysia, Mauritius and other countries, with the objective of creating a simplified regulatory framework in accordance with these studies.

The move draws criticism as many believe that the creation of this type of special economic zone could undermine Sri Lanka’s sovereignty.

According to sources from the Ministry of Foreign Affairs, “Sri Lanka is in talks with China to obtain aid of some 4,000 million dollars” and hopes that Beijing will accept “at some point”. Colombo has requested “a loan of 1,000 million dollars to be able to pay off an equivalent amount of the Chinese debt that matures this year. In addition, it is requesting a line of credit of 1,500 million dollars to pay for Chinese imports and the activation of a swap currency (exchange) of 1,500 million dollars”.