Sri Lanka may allow overseas investors to buy “shorter tenor” corporate debt as part of measures to ease foreign-exchange controls, central bank Governor Ajith Nivard Cabraal said.

Sri Lanka last month allowed foreign investors to buy listed and rated corporate debentures, a step aimed at developing its capital markets and accelerating economic growth as the South Asian nation emerges from a 26-year civil war.

The period of redemption or conversion to ordinary shares, of the debentures “shall not be less than five years,” according to the guidelines. Cabraal said issuers would have to get “special permission” from the central bank if they were structuring their debt sales differently from the new guidelines.

The central bank may also consider offering hedging instruments to overseas investors of corporate debt, Cabraal said in a telephone interview from Colombo.

© 2010 Bloomberg