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Tuesday May 21st, 2024

Sri Lanka accepts exchange offers for 37 pct of eligible bonds, 84 pct of pension fund bonds

ECONOMYNEXT – Sri Lanka has accepted valid offers for 37 percent of all eligible treasury bonds and 84 percent of bonds held by superannuation funds to be exchanged for new bonds as part of a domestic debt restructuring (DDR) exercise, with Thursday September 14 declared as date of settlement.

According to a statement issued by the Treasury on Tuesday September 12, the government will issue new bonds to eligible holders on Thursday September 14, the settlement date, in accordance with the exchange form submitted by each holder.

The percentage of the “aggregate outstanding principal amount of eligible bonds for which valid offers have been accepted” is 37 percent, the Treasury said in its statement. The same for eligible bonds held by superannuation funds as of end June 2023 is approximately 84 percent.

The percentage of the “aggregate outstanding principal amount of eligible bonds for which valid offers have been accepted by the government from superannuation funds necessary to achieve the participation threshold” is 100 percent, subject to the final determination of the Inland Revenue Department (IRD), the statement said.

The government sent out Invitations to Exchange for specific treasury bonds following a Treasury Bond Exchange Memorandum dated July 04.

In Tuesday’s statement, the Treasury said the success of the Invitation to Exchange will enable the government to reduce gross financing needs (GFN) over the next 10 years, thereby contributing to achieving Sri Lanka’s GFN target in line with the ongoing International Monetary Fund (IMF)-supported programme.

Treasury Bonds with ISINs LKB01123I017 and LKB01023I019 matured on 01 September 2023 and were paid in full by the Republic (the government of Sri Lanka) and have been defined as excluded bonds in the third extension notice announced by the government on August 25, and are therefore are excluded from the above table, the statement said.

On the settlement date, the Treasury said the government will issue new bonds to eligible holders in accordance with the relevant exchange form submitted by each such eligible holder to the extent that the republic (government of Sri Lanka) has accepted the offers set out therein.

The government will also pay to each eligible holder of accepted offers the interest accrued and unpaid up to (but excluding) the settlement date on such eligible holder’s eligible bonds in LKR.

In the exchange invitation on July 04, President Ranil Wickremesinghe in his capacity as Minister of Finance said the invitation formed part of the government’s DDR programme, which it has been referring to as a domestic debt ‘optimisatin’ (DDO).

Wickremesinghe said the DDO will allow Sri Lanka to restore sovereign debt sustainability following the ongoing economic and humanitarian crisis.

“The Invitation to Exchange is an arrangement through which Eligible Holders of Eligible Bonds can submit their holdings of Eligible Bonds governed by Sri Lankan law and denominated in Sri Lankan Rupees for a basket of new Treasury bonds to be issued by the Republic with the same aggregate principal amount but extended average maturity compared with the Eligible Bonds. The interest rate has been calibrated to maintain existing returns in the first years and will step down afterwards as inflation pressure abates. The structure was designed to provide a positive projected real return for beneficiaries of the Superannuation Funds in the medium-term whilst being mindful of the need to reduce the Republic’s gross financing needs
and close the financing gap.

“This transaction is a vital element of the measures which, together with economic reform programme, we are undertaking consistent with the Extended Fund Facility agreed with the International Monetary Fund (IMF) in March 2023. In the 75 years of the Republic’s independence, there has never been a more critical period for our economic well-being and future development. That is why we have introduced a robust reform agenda aimed at achieving sovereign debt sustainability, strengthening governance, widening the social safety nets supporting the most vulnerable and ensuring we can grow an inclusive economy attractive to international business. This is how we will improve the lives of our people and ensure they are first in line to benefit
from improvements in our economic conditions,” he wrote.

“The IMF’s debt sustainability analysis has determined the Republic’s public debt to be unsustainable and the IMF Programme is critical to achieving our vision for our country. Hence, this new era starts with the full implementation of IMF Programme and the resolution of our external debt situation with our external official and commercial creditors.

“However, in addition to the resolution of the Republic’s external public debt situation, a domestic public debt optimisation – of which this Invitation to Exchange is one element – is necessary to, among other things, bring down the Republic’s gross financing needs and restore long-term sovereign debt sustainability.

“The successful completion of this domestic debt optimisation is a critical component of both the debt resolution programme and the IMF Programme; it will contribute to unlocking the support of the Republic’s external creditors and will allow the Republic to reach debt targets agreed with the IMF. We need the full participation of the Superannuation Funds in accordance with the Participation Threshold (as defined in the Exchange Memorandum) in order to achieve these goals and I therefore urge you to give it your full consideration,” he said. (Colombo/Sep13/2023)

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Sri Lanka declares May 21 as National Mourning day over Iranian President’s death

ECONOMYNEXT – Sri Lanka declared a national mourning day on Tuesday, May 21 in view of expressing its solidarity with Iran after sudden death of Iran President Ebrahim Raisi following a helicopter crash.

President Raisi and eight others including Iranian Foreign Minister Hossein Amir Abdollahian were killed in the crash when the helicopter had a “hard landing” reportedly due to adverse weather conditions with heavy fog. However, President’s two convoy helicopters reached the destination safely.

“The Sri Lankan government has declared a national mourning day on tomorrow (May 21) on behalf of the sudden death of Iranian president Mr. Ebrahim Raisi,” the Department of Government Information said in a statement.

It also urged all the state institutions have to hoist the national flag half mast.

Raisi was in Sri Lanka on April 24 to launch the Uma Oya dam on a one-day official visit amid tight security. His helicopter crashed when he was returning to Iran after launching a dam in the Azerbaijan border.

President Raisi is seen as a hardliner and a potential successor to Supreme Leader Ayatollah Ali Khamenei.

Earlier this month, Sri Lanka’s Foreign Minister Ali Sabry said the island nation will deal with Iran for investments and trade without being caught into the United States-led sanctions.

Sri Lanka was unable to receive $450 million from Iran for a recently opened Uma Oya multipurpose project started before the sanctions.

Sri Lanka now exports tea to Iran for no dollar payment. Instead, Sri Lanka tea producers are paid by the state-owned Ceylon Petroleum Corporation (CPC) in rupees for the pending crude oil import payments for Iran.

President Ranil Wickremesinghe expressed his condolences on the tragic incident.

“Sri Lanka is deeply shocked and saddened by the tragic death of President Ebrahim Raisi, Foreign Minister Amir Abdollahian and other senior Irani official,” he said in his official X-platform.

“I express my deepest sympathies and sincere condolences to the bereaved families, the government and the people of Iran.”

Raisi, a Muslim jurist, served as the eighth president of Iran from 2021 until his death. (Colombo/May 20/2024)

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Sri Lanka helps launch Global Blended Finance Alliance

ECONOMYNEXT – Sri Lanka has joined a group of nations led by Indonesia which aims to mobilise capital to achieve carbon neutrality, Minister of Water Supply and Estate Infrastructure Jeevan Thondaman said.

The Global Blended Finance Alliance mooted by Indonesia in 2018, was formally launched at the World Water Forum in Bali today.

Among the other founding members are Fiji, France, UAE, Kenya, Luxembourg and Canada.

“Through our collective efforts, the Global Blended Finance Alliance aims to mobilise both public and private capital to help nations achieve carbon neutrality and the SDGs,” Thondaman said on social media platform X (twitter).

“The world has a USD 2.5 trillion funding gap to achieve the Sustainable Development Goals (SDGs) by 2030,” he said.

Blended finance is the strategic use of development finance, such as public and/or philanthropic funds, for the mobilisation of additional commercial finance towards sustainable development in developing countries. (Colombo/May20/2024)

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Sri Lanka rupee closes slightly stronger at 299.60/75 to US dollar

ECONOMYNEXT – Sri Lanka’s rupee appreciated slightly to close at 299.60/75 to the US dollar on Friday, from 299.70/80 the previous week, dealers said. Bond yields were up.

A bond maturing on 15.12.2026 closed up at 10.15/35 percent from 10.05/15 percent.

A bond maturing on 15.09.2027 closed up at 10.45/55 percent from 10.25/40 percent.

A bond maturing on 01.07.2028 closed at 10.80/90 percent.

A bond maturing on 15.01.2030 closed at 11.70/80 percent.

A bond maturing on 01.10.2032 closed up at 11.90/12.05 percent from 11.85/12.00 percent. (Colombo/May20/2024)

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