Sri Lanka’s Central Bank Governor speaks of issuing an international sovereign bond
Governor of the Central Bank of Sri Lanka (CBSL), Dr. Indrajit Coomaraswamy has reportedly assured multiple provisions were being made to raise funds to meet the 2019 debt repayments through a variety of borrowings, swaps and even a possible international sovereign bond.
Coomaraswamy emphasising on the need for Sri Lanka to maintain adequate reserves to prevent the disorderly adjustment of the rupee as well as build buffers for debt repayment next year, has been quoted as saying in the media that the Central Bank had not ruled out the possibility of issuing an international sovereign bond but was currently focusing on several other options.
“The message I would like to convey is while we have large external obligations next year we have been proactive and we have lined up various sources of funding and we feel we will be able to raise the money that is required for Sri Lanka to continue its record of never having missed a single payment,” the Governor has been quoted as saying.
Describing the situation as “very manageable,” Coomaraswamy has noted that the Central Bank was trying to maintain its reserves at about US$ 8 billion.
In a recent mission to Oman, Qatar and Abu Dhabi by the Central Bank team and the chairmen and CEOs of five banks including Bank of Ceylon, National Savings Bank and People’s Bank, it was assured they would be able to raise between US$ 750 million – US$ 1 billion before the end of the year.
“In addition there will be US$ 645 million left over from the Hambantota Port lease and the China Development Bank (CDB) loan, which would be available for debt servicing this year. This carryover and what is raised by the State banks together will enable us to meet the US$ 1 billion repayment of an International Sovereign Bond, which is due on 15 January. In addition there is another US$ 500 million sovereign bond, which is due for repayment in April. The earlier CDB loan of US$ 1 billion can be up-scaled to US$ 1.5 billion so the Government has decided to do that and that money is expected in February. This will come well in time to meet the April repayment.”
The passage of the Active Liability Management Act raised the borrowing limit to Rs. 310 billion (US$ 1.7 billion).
According to Coomaraswamy, this would be the first set of borrowings under the new legislation. Efforts to raise funds via Samurai and Panda bonds have been slow as the Central Bank was awaiting clearance from Cabinet and parliament, which can now be mobilized.
The statements made by the Central Bank Governor on Sri Lanka’s economy and its ability to honor its debt commitments in 2019 is an encouraging sign on the country’s economic strength. Sri Lanka’s key economic indicators are on a growth path and the recent political issues have not had a massive impact on the economy. In the event Sri Lanka opts for an international sovereign bond as hinted by the Central Bank Governor, it would provide an ideal investment opportunity for foreign investors to invest in a venture with secured returns.
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