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Saturday October 1st, 2022

Sri Lanka comfortable repaying foreign debt, sovereign bond in 2020

ECONOMYNEXT – Sri Lanka has see no difficulties repaying foreign debt 2020, including a billion dollar sovereign bond, with only 2.5 billion US dollars left to pay in the balance of the year, a top official said.

In October2020, a billion dollar bond is maturing which cannot be rolled over due to adverse market conditions.

Sri Lanka had 7.2 billion US dollars in reserves.

“To repay the October maturity we are more than comfortable,” Deputy Governor Nandalal Weerasinghe told reporters last week.

“We can make those payments without any issues.”

He said from now to the end of 2020, 2.5 billion US dollars in foreign debt had to be repaid.
But for next year, a new borrowing plan would have to be done.

“So I think we don’t see any issues with debt repayment this year,” he said. “Going forward the government will come up with a borrowing strategy.”

Sri Lanka’s sovereign bond yields soared in March and April amid a Coronavirus pandemic as liquidity injections pressured a dollar soft-peg.

However the discounts has narrowed steadily in recent weeks.

Private credit contracted in May and June, allowing the central bank to buy dollars, despite excess liquidity being high in money markets, which were not loaned out.

Sri Lanka has also slapped import controls. The extent to which import controls were slowing activity and contributing to the credit contraction is not known. (Colombo/Aug25/2020)

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