Sri Lanka getting enough inflows to repay $1.5bn by April: CB Governor
Nov 14, 2018 19:24 PM GMT+0530 | 0 Comment(s)
ECONOMYNEXT - The Central Bank of Sri Lanka said that it is expecting enough foreign inflows to rollover the 1.5 billion dollars of sovereign bond repayments in early 2019.
"We can deal with the two large international sovereign bonds of the first four months," Governor Indrajit Coomaraswamy said.
He said a 1 billion dollar bond will reach maturity on January 15, while another 500 million dollar loan is up for repayment in April.
"We have already got the 1 billion dollar China Development Bank term loan," Coomaraswamy said.
"The term loan had capacity to be upscaled to 1.5 billion dollars, so it will be upscaled. We expect the upscaled funds to come in February, in time for the April payment."
Another 645 million dollars are expected from China for the remaining lease payment for the Hambantota Port, Coomaraswamy said.
Coomaraswamy said more reserves are expected from the Middle East through swaps and loans.
"There was a recent mission to the Middle East. To Oman, Abu Dhabi and Qatar."
"The mission was accompanied by chairmen and chief executives of the five structurally important banks," Coomaraswamy said.
"Through contacts of the Bank of Ceylon, People's Bank and National Savings Bank, the state banks will be able to bring another 750 million dollars to 1 billion dollars," he said.
"These are expected before the end of the year."
The central bank is also in initial discussions with the central banks of Oman and Qatar to set up swap arrangements, he said.
A swap arrangement with the People's Bank of China which expired in September is expected to be renewed with more flexible terms, Coomaraswamy said.
The parliament in October had approved the raising of 1.75 billion dollars next year through the Active Liability Management Act, he said.
Coomaraswamy said that it would be easier to raise these funds through Middle Eastern, Chinese and Japanese markets, where strong government to government relations would offset foreign investor confidence, which has taken a hit during the current political crisis.
"We will pursue all avenues, but if there are markets not having appetitie to invest in Sri Lanka, we will not go there," he said.
Sri Lanka has an average 4 billion dollars of foreign repayment annually for the next five years, he said.
Sri Lanka's central bank operates a soft-pegged exchange rate regime, involving defending a moving curency peg and printing money to 'sterilize' the intervention, contradictory policy which lead to balance of payments crises.
Sterilizing forex sales led to the collapse of the Bretton Woods system of soft-pegs, the European Exchange Rate Mechanism and numerouse Latin American currency crises and the East Asian crisis, classical economists have pointed out.
On Wednesday the central bank cut reserve ratio dumping 90 billion rupees in the banking system, to sterilize interventions, while raising rates by 50 basis points. (Colombo/Nov14/2018)