Sri Lanka in talks with Citi for US$500mn syndicated loan

ECONOMYNEXT – Sri Lanka is in talks with Citibank to syndicate a 500 million US dollar term loan, Central Bank Governor Arjuna Mahendran said.

He would prefer to float the loan after negotiating a deal with the International Monetary Fund, which will help reduce interest rates.

An IMF team is expected to arrive in the island in late March or April to work out plan to trim Sri Lanka’s budget deficit.

Mahendran said an International Monetary Fund program would be a confidence booster for investor who would know that Sri Lanka was following an economy strategy that had wide consensus.

Sri Lanka last year called bids for a 3-year syndicated loan.

An IMF program may involve about a billion US dollars depending on the exact program that was worked out, but the volume itself was not important he said.

Once an IMF deal was in place Sri Lanka could go to the markets and raise funds. In addition to the syndicated loan, a sovereign bond was also on the cards, he said.

An IMF program will also bring budget support from the World Bank, Asian Development Bank and Japan International Co-operation Fund, he said.

ADB has already said it is willing to give 200 million US dollars.