Sri Lanka plans to restrict foreign holdings of government securities to a maximum 5 percent from the current 10 percent to prevent possible hot money flows and improve the quality of reserves, the country's central bank chief said on Wednesday.

The surprise move comes after the island nation suffered about $1 billon in foreign outflows from rupee-denominated government securities in 2018. Nearly 42 percent of these outflows were in the last couple of months in the aftermath of a political crisis triggered by President Maithripala Sirisena sacking Prime Minister Ranil Wickremesinghe. Foreigners held 3.1 percent of the total outstanding government securities of 5.29 trillion rupees ($28.95 billion) as of December 26, central bank data showed.

Copyright Reuters, 2019