Colombo Stock Exchange to remain shut next week as Lanka struggles to combat forex crisis

The Colombo Stock Exchange will remain temporarily closed for a week from Monday to provide investors an opportunity to have "more clarity and understanding" of the current economic conditions in crisis-hit Sri Lanka that would help them "to make informed investment decisions," it was announced on Saturday.

"The stock market will remain temporarily closed for a period of five business days from April 18, 2022," the Securities and Exchange Commission of Sri Lanka (SEC) said in a press release.

Sri Lanka is facing its worst economic crisis since gaining independence from the UK in 1948. The economic crisis also triggered a political turmoil in the island nation with citizens holding nationwide street protests for weeks over lengthy power cuts and shortage of fuel, food and other daily essentials and demanding ouster of President Gotabaya Rajapaksa.

The Board of Directors of the Colombo Stock Exchange (CSE) in a communication on Friday called upon the SEC to temporarily close the stock market citing the present situation in the country, the release said.

Many other stakeholders of the securities market, including the Colombo Stock Brokers Association, have also sought the temporary closure of the market on the same grounds.

The SEC said it carefully considered the grounds that have been adduced by them and has evaluated the impact the present situation in the country could have on the stock market, in particular the ability to conduct an orderly and fair market for trading in securities.

"The SEC is of the view that it would be in the best interests of investors as well as other market participants if they are afforded an opportunity to have more clarity and understanding of the economic conditions presently prevalent, in order for them to make informed investment decisions," the release said.

Therefore, acting in terms of the relevant provisions, the SEC decided to direct the CSE to temporarily close the stock market for a period of five business days commencing from April 18, it said.

Sri Lanka is on the brink of bankruptcy, saddled with dwindling foreign reserves and USD 25 billion in foreign debt due for repayment over the next five years. Nearly USD 7 billion is due this year only.

The government announced Tuesday that it is suspending repayments of foreign debt, including bonds and government-to-government borrowing, pending the completion of a loan restructuring programme with the International Monetary Fund (IMF).

President Rajapaksa has defended his government's actions, saying the foreign exchange crisis was not his making and the economic downturn was largely pandemic driven by the island nation's tourism revenue and inward remittances waning.