Sri Lanka to sell sovereign bonds first; alternatives later: CB Governor
ECONOMYNEXT – Sri Lanka will sell US dollar sovereign bonds first and resort to other alternatives later as yields of sovereign bonds fell and external market conditions improved, Central Bank Governor Indrajit Coomaraswamy said.
In the last quarter of 2018, Sri Lanka dropped plans to sell bonds after a political crisis was triggered on October 26 when President Maithripala Sirisena appointed Mahinda Rajapaksa as Prime Minister without a parliamentary majority.
Sovereign bond yields spiked but has come down to levels seen shortly before the crisis, Governor Coomaraswamy said.
The prompt repayment of a billion US dollar sovereign bond in January has also helped improve confidence, he said.
At the time Sri Lanka, was looking for alternatives to repay maturing bonds such as syndicated loans.
Coomaraswamy said Sri Lanka has since ‘re-caliberated’ the strategy and would first go to bond markets and then raise the balance money through alternative means.
Sovereign bonds would not be cheap but costs would now be ‘reasonable’, he said.
Sri Lanka was planning to raise at least 2.0 billion US dollars through sovereign bonds denominated in US dollar, yen, and renminbi.
Finance Minister Mangala Samaraweera has indicated that Sri Lanka may raise as much as 3.0 billion US dollars from international bond markets in 2019.
Sri Lanka wanted to raise 5 to 10 year bonds, as part of a debt restructuring strategy, Coomaraswamy said.
Coomaraswamy said he could not give a volume or details as Sri Lanka was under ‘radio silence.’
Sri Lanka was also negotiating with the International Monetary Fund to resume a program. Economists have said that a 3.6 percent deficit target for 2019 originally planned was too ambitious.
Coomaraswamy said talks with the IMF were ‘constructive’ but it was too early to give specific comments.
Sri Lanka was also in talks with the Bank of China for a 300 million US dollar loan. Yen or Panda bonds would follow after a dollar bond sale, he said.
Meanwhile, a 400 million dollar swap from the Reserve Bank of India was due shortly.
Sri Lanka had also been offered a 1.5 billion US dollar equivalent Renminbi swap by the People’s Bank of China, which was being studied.
Qatar’s central bank has also offered a Riyal swap. (Colombo/Feb22/2019-SB)