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Tuesday September 28th, 2021
Economy

Sri Lanka to recoup US$200mn from bond settlement back to forex reserves: Minister Cabraal

ECONOMYNEXT – Sri Lanka expects to recoup around 200 million US dollars from a billion US dollar International Sovereign Bond repayment on July 27, State Minister for Money and Capital Markets Nivard Cabraal said.

Out of the billion US dollar ISB which is being repaid this week 310 million dollars is held by resident investors.

“That 310 million will be an inflow,” Cabraal said. “We expect to take about 200 million dollars through swaps to build reserves.”

“The rest will also add to dollar liquidity in the domestic market.”

The central bank had a over 600 million dollars in swaps in the 4.0 billion dollar reserves in June.

Sri Lanka has faced a funding shortfall in the banking system after rating agencies downgraded island in 2020 leading to inverted swap rates (forward discounts).

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The swap rates have also come down over the past few weeks as some Sri Lanka Development Bonds were repaid.

Sri Lanka is repaying a billion US dollar bond falling due on July 27.

“Our liability will be discharged as specified in the documents,” Cabraal said. “I have been saying right throughout that we will pay.

“Unfortunately some bond holders panicked due to rating actions and analyst reports and sold off at huge discounts. Those who came last profited most.”

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Sri Lanka sending money to repay billion dollar ISB, late buyers to profit: Minister Cabraal

The July 2020 bond was offered at around 17 percent on Monday and a January 2021 bond around 26 percent. (Colombo/July26/2021)

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