Sri Lanka to raise Treasury bill borrowing limit by Rs400bn
COLOMBO (EconomyNext) – Sri Lanka is to lift the borrowing ceiling through Treasury bills by 400 billion rupees by changing the underlying law, allowing the state to borrow more short term money.
The amendment to the Local Treasury Bills Ordinance is to be presented to parliament on April 07.
As of the April 01, the government has issued 829 billion rupees worth Treasury bills.
There is an existing ceiling on Treasury bills of 850 billion rupees. Because Treasury bills were mostly rolled over during the last year, rates have not moved up. Instead new issues have been longer term Treasury bonds.
Expanding the limit of Treasury bills, which have a maturity of 3, 6 and 12 months will allow the government to borrow more money on shorter tenures, rather than paying high rates for many years by borrowing from Treasury bonds.
The entire increase need not be used up in one year. Sri Lanka planned for a budget deficit of 499 billion rupees for 2015 which was viewed as optimistic by some analysts.
Sri Lanka’s cashflows are tight after a 1.5 billion US dollar sovereign bond scheduled for the first quarter of 2015 was delayed by the new administration, which also raised public sector salaries and then cut some taxes.
However if state finances are expected to get better in the coming years, with more taxes collected from the people to pay salaries of state workers, interest rates can come down.
In a revised budget presented in January 2015, he public sector salary cost was raised by 89.7 billion rupees, though in the past, actual turnouts in the past had been higher than the original allocation.
(Error Corrected Rs400bn ceiling expansion)