Sri Lanka limits foreign currency holdings amid crisis

Sri Lanka will lower the maximum amount of foreign currency that individuals can possess to $10,000 from $15,000 and penalize anyone who holds it for more than three months, the central bank announced Thursday, as police fired tear gas and water cannons at thousands of students demanding the government step down for failing to solve the country’s economic crisis.

The students from the Inter University Students’ Federation attempted to march to the presidential residence but were blocked by police in the commercial center of the capital, Colombo.

Central Bank Governor Nandalal Weerasinghe said people must place their excess foreign currency in a bank or convert it into local currency within two weeks. After that time, Central Bank officials and police will conduct raids and anyone violating the new rules will be fined, he said.

The regulations, to be implemented under the country’s foreign exchange act, come amid a severe shortage of foreign currency that has sharply limited imports of essential items such as fuel, cooking gas, medicine and food.

For months, Sri Lankans have endured long lines to buy those essentials, most of which come from abroad. Shortages of hard currency have also hindered imports of raw materials for manufacturing and worsened inflation.

Protesters blocked main roads to demand gas and fuel, and television stations showed people in some areas fighting over limited stocks.

Weerasinghe said black-market premiums have led people to hoard foreign currency.

The Indian Ocean island nation is on the brink of bankruptcy and has suspended payments on its foreign loans. Its economic woes have brought on a political crisis, with the government facing widespread protests.

Sri Lanka has suspended repayment of about $7 billion in foreign loans due this year out of $25 billion to be repaid by 2026. The country’s total foreign debt is $51 billion. The finance ministry says the country currently has only $25 million in usable foreign reserves.