Local firms cleared to raise dollars on CSE’S Multi-currency Board

„Cabinet approval granted to relax foreign exchange controls after CB recommendations „CSE hopeful of first successful listing on Multi-currency Board in a few months „CSE and SEC to draft rules to facilitate local firms to raise funds on Multicurrency

In a bid to support the expansion plans of local firms outside of Sri Lanka, the Cabinet of Ministers this week decided to relax the foreign exchange controls to allow local firms to raise foreign funds via foreign currency-denominated equity listings and debenture issuances on the Colombo Stock Exchange’s (CSE) Multicurrency Board.

After considering the recommendations of the Central Bank (CB), the Cabinet of Ministers on Monday approved the proposal to relax the relevant existing foreign exchange restrictions hindering the listed local firms from issuing such foreign currency securities on the CSE, including dividend payments in foreign currencies.

“Foreign Exchange Orders No. 2 of 2021 does not permit to be debited to the Business Foreign Currency Account by the issuance of debentures or initial shares issued in foreign currency or the payment of dividends or the payments received by distributing of foreign currency,” the Government Information Department noted.

The Cabinet approval was also granted to submit the amended Foreign Exchange Orders to Parliament.

Speaking to Mirror Business, CSE Chairman Dumith Fernando said he is hopeful of the first successful listing on the Multi-currency Board in a few months.

However, he noted that the Cabinet approval granted on Monday is a preapproval for local firms to raise funds on the Multi-currency Board, as there is more to be done.

Upon the lifting of foreign exchange regulatory restrictions, the CSE along with the support of the Securities and Exchange Commission (SEC) is expected to develop rules for local companies that intend to raise funds on the Multi-currency Board, as the next step.

“We already have rules approved for foreign firms on the Multi-currency Board. We will need to think about the issues more differently for local firms in developing rules for them,” Fernando added.

In 2019, the CSE’S Multi-currency Board was launched to provide access to foreign companies a diversified pool of investors through allowing foreign companies to list their shares on the CSE in foreign currencies approved by the Central Bank.

Subsequently, the CSE last year decided to open up the Multi-currency Board, with an aim to support local companies, which have foreign ambitions.

Fernando noted that there are a couple of companies that have already actively expressed interest in raising funds on the Multi-currency Board.

Sharing the CSE’S sentiments, the CB expects this initiative to increase the interest of foreign investors in the country’s listed companies, enabling the CSE to attract foreign currency inflows into the country with the increased participation of foreign investors.

Further, the CB is also hopeful that an influx of foreign funds to the Multi-currency Board would reduce the pressure on Sri Lankan rupee while providing an alternative for local companies to source foreign funds within the country.