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Monday April 15th, 2024

China on track to bail out Sri Lanka with US$1.25bn in 2018

ECONOMYNEXT – China is on track to bail out Sri Lanka with up to 1.25 billion US dollars in 2018, with a below market rate syndicated loan and smaller Panda bond planned for later this year, after coming under fire for driving the Indian Ocean island in to a debt trap.

Sri Lanka is facing foreign debt repayment spikes in 2019 to 2021 period and the island changed its borrowing laws to allow extra money to be raised early to stretch repayment.

Earlier in 2018 China Development Bank easily beat offers from Western international banks for a syndicated loan to win the mandate to syndicated a billion US dollar loan for Sri Lanka both in rates and tenor (Sri Lanka may get China Development Bank loan within two months).

While private international bank offered three year money, CDB offered 8-year funds with a 3-year grace period at around 5.25-5.35 percent.

In April 2018, Sri Lanka sold a 5-year bond for 5.75 percent.

"This is actually extraodinarIly good terms that we have got," Central Bank Governor Indrajit Coomaraswamy said.

The first 500 million US dollar tranche of the syndicated loan will arrive in Sri Lanka at the end of August, Coomaraswamy said. The balance would come in October.

China is also helping Sri Lanka sell a 250 million dollar equivalent Panda bond (Yuan denominated bond) at the end of 2018, in yet another move to fund Sri Lanka.

The People’s Bank of China has just set up joint task force to help Sri Lanka with the Panda bond, Governor Coomaraswamy said.

Twin deals seem to indicate that China is going out of its way to bail out Sri Lanka, which until China’s entry to the scene had an impeccable debt repayment record.

Coomaraswamy says China has always had friendly relations with Sri Lanka.

"During consultations it was clear that they see us as a key strategic partner as far as the BR (Belt and Road) initiative is concerned, given our location," he said.

"So that is a factor. And of course Sino-Sri Lanka relations have been excellent right through the Rubber-Rice Pact of 1952, they have always been with us."

"You remember during the conflict they were pretty much the main partner Sri Lanka had in terms protecting the territorial integrity. So China has always been supportive of Sri Lanka."

China has come under fire for funding so-called vanity projects in ex-President Mahinda Rajapaksa’s hometown in Hambantota without proper feasibility studies. (Colombo/Aug03/2018)

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Sri Lanka to discuss two contentious points with bondholders: report

ECONOMYNEXT – Sri Lanka and sovereign bondholders are to discuss two matters in the near future which the two sides failed to reach agreement at March talks in London, a media report quoting a top aide to President Wickremesinghe as saying.

Sri Lanka and bondholders had discussed four matters on restructuring international sovereign bonds in late March and agreement had been reached on two, President’s Chief of Staff Sagala Ratnayake was quoted as saying on state-run ITN television.

A restructuring proposal by bondholders was not in line with IMF requirements, and Sri Lanka had sent a counter proposal, he said.

The matters will be discussed at round of talks in the near future.

Sri Lanka was optimistic of reaching an agreement with the bondholders before June, officials have said.

According to matters already in the public domain, sovereign bond holders are keen to get a bond tied to dollar gross domestic product, as they feel IMF growth projections are too low.

In past re-structuring so-called value recovery instruments, a type of warrant, gave their owners extra payments if a country did better than expected and were tied to items like oil prices.

Bondholders had initially proposed bond which would have a lower hair cut initially, and it will have additional hair cuts if growth is low (about 3.1 percent) as projected in an IMF debt sustainability analysis. (Colombo/Apr15/2024)

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BIMSTEC Secretary General visits Sri Lanka, discusses regional cooperation

ECONOMYNEXT – The Secretary General of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), discussed measures to enhance regional cooperation, during his visit to the island last week.

Ambassador Indra Mani Pandey, Secretary General of BIMSTEC visited Sri Lanka from 07 – 12 April 2024, following his assumption of office as Secretary General of BIMSTEC in January this year.

The Secretary General “met with senior officials of relevant Ministries/Agencies to discuss measures to enhance regional cooperation under various BIMSTEC initiatives,” the Foreign Ministry said in a statement.

Several BIMSTEC countries have bilateral trade agreements, such as Sri Lanka and India, Thailand and Myanmar, Sri Lanka and Thailand, but no collective regional agreement to enable intra-regional leverage.

During the visit, Secretary General Pandey held discussions with Ministry of Foreign Affairs officials and paid courtesy calls on the President and the Minister of Foreign Affairs.

Secretary General Pandey participated at an event on “Regional Cooperation through BIMSTEC” organized by the Lakshman Kadirgamar Institute (LKI) on 9 April. (Colombo/April15/2024)

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Sri Lanka rupee closes weaker at 299.00/10 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 299.00/10 to the US dollar in the spot forex market on Monday, from 298.50/55 on Wednesday, dealers said, while bond yields were broadly steady.

A bond maturing on 15.12.2026 closed stable at 11.30/35 percent.

A bond maturing on 15.09.2027 closed stable at 11.90/12.00 percent.

A bond maturing on 15.12.2028 closed at 12.10/20 percent up from 12.10/15 percent.

A bond maturing on 15.09.2029 closed stable at 12.20/40 percent. (Colombo/Apr15/2024)

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