An Echelon Media Company
Thursday April 18th, 2024

Sri Lanka says will maintain zero default record as Coronavirus jitters hit sovereign bonds

ECONOMYNEXT – Sri Lanka’s will honor all debt commitments Treasury Secretary Sajith Attygalle said as the island’s sovereign bond yields soared amid global market jitters and some maturities were trading as much as 40 percent below par.

“We haven’t defaulted in our history,” Attygalle said. “The government is keen to maintain that position.”

Sri Lanka has just raised a 500 million dollar loan from China Development Bank and another 800 million dollars tranche is on the way.

Sri Lanka will shortly sign a loan deal with the World Bank which will also include funds to bolster the island’s health sector to battle against Coronavirus.

Sri Lanka is also in talks with other multilateral lenders he said.

Sri Lanka also has a 9.6 billion dollar pipeline of committed foreign debt from multilateral and bilateral lenders, a part of which will be disbursed this year from time to time.

In late 2020, Deputy Central Bank Governor Nandalal Weerasinghe said about 1.5 billion of multilateral lending will go towards repaying debt.

Sri Lanka has also raised extra debt in 2019, which will go to settle debt up to April. The repayments for the first half of 2020 is about 2.8 billion US dollars, out of a total of about 45 billion US dollars for the full year, the Finance Ministry said in a March report.

“We also have a fall back option of using foreign reserves,” Attygalle said.

Sri Lanka twice used forex reserves to repay sovereign bonds, when the country felt that it was not ready to go to market. In 2015 shortly a 500 million dollar bond after Presidential elections and in early 2018 after a constitutional crisis when yields on bonds rose steeply.

This year the central bank stopped domestic banks from buying the cheap bonds, leading to drying up of liquidity and further falls in prices, analysts said.

Analysts, however, have raised concerns about monetary instability given recent performance with the current framework.

Sri Lanka’s exports and also bank credit has been hit by countermeasures placed to fight Coronavirus as well as markets drying up in the West.

Sri Lanka is one of 75 countries that is qualified to ask for a debt moratorium from bilateral and multi-lateral suggested by the World Bank and IMF.

President Gotabaya Rajapaksa has urged the World Health Organization chief to Tedros Adhanom to push the moratorium as many developing countries depended on tourism, exports, remittances and foreign investment in debt and equity markets which were hit by COVID-19, in a telephone conversation, his office said.

Sri Lanka is one of the few countries that are actively engaged in contact chasing to battle Coronavirus, along with Korea and Vietnam.

Sri Lanka started quarantining Wave I arrivals from China in January 2020 and tightened restrictions and has now slapped curfews to stop community spread.

Sri Lanka is now trying to stamp out clusters of Wave II infections that came to the country from third countries like Italy, the UK, Thailand, and India before all arrivals were stopped on March 19. (Colombo/Apr01/2020-sb)

Leave a Comment

Your email address will not be published. Required fields are marked *

Leave a Comment

Leave a Comment

Cancel reply

Your email address will not be published. Required fields are marked *

Sri Lanka’s discussions with bondholders constructive: State finance minister

ECONOMYNEXT – Sri Lankan authorities continue to engage all debt restructuring negotiations in good faith, within principles of equitable treatment among creditors, and with maximum transparency within the norms of such negotiations, State Minister of Finance, Shehan Semasinghe has said.

“It is standard practice, when a representative group of bondholders is formed, to entertain confidential discussions with such group and its appointed advisors. In the case of Sri Lanka, the Ad Hoc Group of Bondholders represents holders controlling more than 50% of the bonds, which make them a privileged interlocutor for Sri Lanka,” Semasinghe said on X (twitter).

“It is well understood that given the price sensitive nature of the negotiations, and according to market regulations, discussions with the Group and its advisors are to be conducted under non-disclosure agreements. This evidently restricts the ability of the Government to unilaterally report about the substance of the discussions.

“The cleansing statement, which was issued on the 16th of April, at the conclusion of this first round of confidential discussions with members of the Group, aims at informing the Sri Lankan people, market participants and other stakeholders to this debt restructuring exercise, about the progress in negotiations. It provides the highest possible level of transparency within the internationally accepted practices in such circumstances.

“As informed in this statement, confidential discussions held in recent weeks with bondholders’ representatives proved constructive, building on the restructuring proposals presented by both parties. During the talks both sides successfully bridged a number of technical issues enabling important progress to be made. Sri Lanka articulated key remaining concerns that need to be addressed in a satisfactory manner.

“The next steps would entail further consultation with the IMF staff regarding assessments of the compatibility of the latest proposals with program parameters. Following these consultations, we hope to continue discussions with the bondholders with a view to reaching common ground ahead of the IMF board consideration of the second review of Sri Lanka’s EFF program.”

Continue Reading

Sri Lanka rupee weakens at 301.00/302.05 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 301.00/302.05 to the US dollar in the spot forex market on Tuesday, from 299.00/10 on Tuesday, dealers said. 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 at 11.90/12.05 percent up from 11.95/12.00 percent.

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

A bond maturing on 15.07.2029 closed at 12.25/40 percent.

A bond maturing on 15.03.2031 closed at 12.30/50 percent. (Colombo/Apr17/2024)

Continue Reading

Sri Lanka Treasury Bill yields down across maturities

ECONOMYNEXT – Sri Lanka’s Treasuries yields were down across maturities at Wednesday’s auction with the 3-month yield moving down 7 basis points to 10.03 percent, data from the state debt office showed.

The debt office sold all 30 billion rupees of 3-month bills offered.

The 6-month yield fell 5 basis points to 10.22 percent, with 25 billion rupees of bills offered and 29.98 billion rupees sold.

The 12-month yield dropped 4 basis points to 10.23 percent with 18.01 billion rupees of bills sold after offering 23 billion rupees. (Colombo/Apr17/2024)

Continue Reading