Tuesday July 16, 2019

Sri Lanka preparing for sovereign bond, state banks loans to go ahead

Jan 03, 2019 15:31 PM GMT+0530 | 0 Comment(s)

ECONOMYNEXT  - Sri Lanka is preparing the groundwork to sell a sovereign bond at a suitable time Central Bank Governor Indrajit Coomaraswamy said, though a maturing billion dollar bond in January will be repaid instead of being rolled over in 2018 after political crisis hit the island in October.


Sri Lanka will get cabinet approval to sell the sovereign bond appoint managers who will then go for a bond sale at a appropriate time, he said.


Sri Lanka was downgraded by Moody's, Fitch and Standard and Poors to B, during the crisis, just as the country was about to sign a deal with the International Monetary Fund for the last stretch in a 3 year program.


"If we get downgraded again, we will lose access to capital markets," he said.


President Maithripala Sirisena after he triggered a political crisis by appointing Mahinda Rajapaksa as Prime Minister and illegally dissolving parliament delaying plans to raise loans and rollover bonds.


Three state banks were also planning to raise loans from the Middle East and give the government, which were delayed by the crisis will also go ahead, Coomaraswamy said.


But the rates had increased after the downgrade, and had to be re-negotiated.


Coomaraswamy said Sri Lanka will repay a sovereign bond in January out of its own resources, with the Treasury already having about 650 million dollars in proceeds from the sale of the Hambantota port.


Sri Lanka has about 5.9 billion US dollars of debt to repay in 2019 including dollar denominated domestic debt.


Sri Lanka's forex reserves fell below 7 billion US dollars in December, down from a target of 10 billion in the beginning of the year, with the central bank losing control of a peg after it cut rates and printed money in April followed by another unsterilized build up of liquidity in August, which undermined the credibility of its peg.


In the November the central bank lost 500 million dollars in interventions amid the political crisis. (Colombo/Jan03/2019)


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