Banks barred from buying Lankan sovereign bonds

The Central Bank has barred licensed commercial banks and National Savings Bank (NSB) from purchasing Sri Lanka international sovereign bonds (ISBs) for a period of six months unless such purchases are funded with new dollars sourced abroad.

The Central Bank said the Direction would be implemented with immediate effect.

The Central Bank said the move was aimed at easing the pressure on the exchange rate and the stress on financial market due to impacts of COVID-19 outbreak.

Banks buying ISBs, which are trading at steep discount, could trigger forex shortages amid lower rates and liquidity injections to the economy by way of stimulus.