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Friday June 14th, 2024

Sri Lanka to reduce ‘vulnerable’ international sovereign bond holdings: Jayasundera

ECONOMYNEXT – Sri Lanka will reduce its international sovereign bond (ISB) stocks gradually without going for new such instruments in the next few years and is expected to replace them either with another debt instrument or longer tenure borrowing, President’s Secretary P B Jayasundera said.

Sri Lanka had to repay 15 billion US dollars from the ISB alone when President Gotabaya Rajapaksa elected as the president in November 2019.

The island nation has already paid 2 billion US dollar since then and the next 500 million US dollar is due in January 2022.

Jayasundera, the top most civil servant and former finance secretary who still has the influence in economic policy and budget said the “exposure to sovereign bond should be reduced further”.

“Then we have more predictable, long term, and stable external debt portfolio,” Jayasundera told EconomyNext in an interview.

“Once the outstanding sovereign bond is brought down to say 7-8 billion US dollars, then you have a space to get the volume for a more longer term an also to replace it another financial instrument.”

“So the vulnerability of the whole debt market is contained because what we need is more equity market and less vulnerable debt market considering our situation.”

Finance Minister Basil Rajapaksa last week announced the country will not go for any commercial borrowing and will be mainly relying on concessionary loans from multilateral lending agencies.

Jayasundera said the World Bank and Asian Development Bank are coming in “big way” with the World Bank has pledged $500 million for rural road development initiatives by October and similar concessionary loans “will take care of public investments”.

“Traditional sovereign bonds are not favourable to us because we are basically moving at higher discount rate,” Jayasundara, sitting at his office at the presidential secretariat, said.

“We should make bullet payment in the next 2-3 years. Our idea is not to go for any commercial borrowing.”

No Sovereign Default

Global and local analysts say Sri Lanka is facing risk of sovereign debt default and the country’s risk of defaulting on such default is on the rise given its foreign exchange reserves has to be boosted with borrowed loans in a vicious cycle.

Already Sri Lanka’s sovereign rating has been downgraded to a junk category, far below investment grade due to risks of heavy external debt repayment.

The government has not gone for sovereign bonds under the current government as the country’s risk premium has spiked due to rating downgrade.

Jayasundera, however says people have misunderstood Sri Lanka’s debt stocks.

“I guarantee there won’t be a default,” he said.

“If somebody understands our debt profile very clearly there is no reason for anybody to fear of a sovereign debt default.”

Jayasundera said out of 4.5 billion US dollar total debt per year, only 2 billion US dollar repayment is sovereign bond including principle and interest payments.

The rest 2.5 billion US dollar loan is bilateral or multilateral.

“On bilateral loans, we have slowed down big, expensive financing projects,” he said.

“Within the numbers I have personally worked out, I don’t see any risk that Sri Lanka will default and there is the same fear in the last 2-3 years.”

“Rating agencies keep telling these and everybody is telling Sri Lanka will default. In fact, the current rating is a default rating. But Sri Lanka has never defaulted.”

“The next bullet (sovereign bond) payment is in January and that $500 million will definitely be honoured because the cash flow has been worked out on that basis.”

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Sri Lanka opposition leader proposes Grama Rajya system in addition to 13A

Opposition leader Sajith Premadasa (r) – File photo

ECONOMYNEXT — Sri Lanka opposition leader Sajith Premadasa has proposed devolving power to the village level through a Grama Rajya system in addition to implementing the 13th amendment to the constitution.

Speaking at an event in Jaffna on on Wednesday June 12, Premadasa said all provinces will benefit from the 13th amendment.

“Whatever one’s ethnicity, religion, status or region, this country has citizens of equal level. They’re all Sri Lankan citizens.

“There is no division or grouping.  As we give you and every other province what you should be given through the 13th amendment, we must implement a Grama Rajya system,” Premadasa said, addressing a crowd of school children and other attendees.

Premadasa’s assurance of implementing the 13th amendment has already drawn some protest in the south.

A collective of civil society organisations held a protest outside the office of the leader of the opposition in Colombo on Thursday June 12.

Calling itself the ‘Coalition Against Partition of Sri Lanka’, the group carrying national flags marched up to the opposition leader’s office Thursday June 13 morning and demonstrated against the full implementation of the 13th amendment.

“We arrived here today to hand over a missive against devolving police powers, land powers and judicial powers. If Mr Premadasa is inside, come outside,” Jamuni Kamantha Thushara, Chairman of the Citizen’s Movement Against Fraud, Corruption, and Waste, was seen declaring at the site.

“First of all, tell us what we stand to achieve by dividing and giving away the north and east,” said another protestor, warning against bringing the 13th amendment “anywhere here (paththa palaathe)”.

A police officer at the scene the protestors that a secretary to the opposition leader was ready to accept their letter.

“In Kilonochchi, he says the 13th amendment will be implemented. The votes in the north are going to be decisive this election. To win those votes, President Ranil Wickremesinghe, Sajith and Anura Kumara Dissanayake all say they will implement the 13th. We will not allow this country to be divided into nine pieces,” said Thushara.

Ven Balangoda Kassapa Thero, who was arrested on June 06 during a protest against the new Electricity Act, was also seen at Thursday’s protest. The Buddhist monk requested for a debate with Premadasa on the matter of the 13th amendment. (Colombo/Jun12/2024)

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Sri Lanka rupee closes flat at 303.85/95 to US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed broadly flat at 303.85/95 to the US dollar on Thursday, from 303.80/304.00 to the dollar the previous day, dealers said. Bond yields were down.

A bond maturing on 15.12.2026 closed at 10.00/30 percent, down from 10.20/40 percent.

A bond maturing on 15.10.2027 closed at 10.60/75 percent.

A bond maturing on 01.07.2028 closed at 11.00/15 percent, down from 11.15/40 percent.

A bond maturing on 15.09.2029 closed at 11.80/85 percent.

A bond maturing on 15.05.2030 closed at 11.85/12.05 percent, down from 11.90/12.05 percent.

A bond maturing on 01.10.2032 closed stable at 11.95/12.15 percent. (Colombo/Jun13/2024)

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Sri Lanka sells Rs295bn in 2027 to 2031 bonds

ECONOMYNEXT – Sri Lanka has sold 295 billion rupees in 2027, 2029 and 2031 bonds, data from the state debt office showed.

The debt office sold an offered 60 billion rupees of 15 October 2027 at an average yield of 10.30 percent.

All offered 125 billion rupees of 15 September 2029 bonds were sold at 11.00 percent.

All 110 billion rupees offered of 01 December 2031 bonds were sold at 12.00 percent. (Colombo/May13/2024)

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