COLOMBO, Nov 5 (Reuters) - Sri Lanka central bank will allow foreign currency outflows up to $500,000 for foreign investments without its approval with effect from December, a central bank official said on Thursday.

Investors, hitherto, were required to get central bank approval before taking foreign currencies out of the country for investments, a measure designed to control foreign exchange outflows.

'Up to $500,000 can be taken out for investment purposes without prior central bank approval and it will be hopefully from next month,' K.D. Ranasinghe, director at the central bank's economic research department, told Reuters.

The central bank has stepped up currency controls after Sri Lanka's reserves fell by half in the four months of 2008 due to withdrawal of foreign funds in the face of global recession.

Central bank officials have said the gross official reserves are now at a record high level of around $5 billion, a 185 percent jump so far this year and the bank is more comfortable in facing foreign exchange risks now compared to early this year.

Sri Lanka agreed with International Monetary Fund not to tighten any existing currency exchange restrictions or introduce any new restrictions as part of its deal on a $2.6 billion loan that was approved in July.

(Reporting by Shihar Aneez; editing by Tomasz Janowski)

((shihar.aneez@reuters.com; +94-773-763-577; Reuters Messaging; shihar.aneez.reuters.com@reuters.net)) Keywords: SRILANKA FOREX/

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