(Adds details, fund manager quotes, background)<\/p>\n
LONDON, July 2 (Reuters) – Sri Lanka extended foreign exchange controls for another six months on Friday in its latest bid to preserve the country\u2019s dwindling currency reserves.<\/p>\n
The restrictions published in the country’s official gazette here, focus on limiting the amount of dollars Sri Lankans and local firms are allowed to send out of the country.<\/p>\n
The curbs come as worries continue about the government\u2019s ability to repay its debts, despite regular reassurances from ministers and officials that it will.<\/p>\n
Mixed with the ongoing COVID-19 pandemic, apparent resistance to International Monetary Fund support and patchy demand in recent local debt auctions, market pressure has intensified.<\/p>\n
Friday saw the worst day for the country\u2019s government debt markets since October, with one bond due to be repaid next July falling more than 4 cents and a number of others dropping between 2 and 4 cents.<\/p>\n
\u201cIf Sri Lanka is to avoid a default in the medium-term it needs an IMF programme that will help anchor expectations of fiscal consolidation,\u201d said Raza Agha, head of emerging markets credit strategy at Legal & General Investment Management.<\/p>\n
Head of Barings\u2019 Global Sovereign Debt and Currencies Group Ricardo Adrogue added that it was encouraging though that the government seemed determined not to default.<\/p>\n
\u201cThat is a big plus, but the (debt) numbers however are eye-opening,\u201d highlighting how the country spent roughly 50% of government revenues on debt payments.<\/p>\n