Govt. doesn’t rule out selling a sovereign bond this year

The government said it doesn’t rule out the possibility of selling a sovereign bond this year as part of its foreign borrowings quota for 2021, amid the Treasury seeking to rollover part of its dollar-denominated debt. 

Addressing the weekly Cabinet press briefing last morning, Co-Cabinet Spokesman Minister Udaya Gammanpila said it is in the interest of foreign investors to subscribe to Sri Lanka issued bonds when the government seeks to rollover part of its debt. 

It could be relatively easier for countries such as Sri Lanka, which are part of the emerging and frontier market block to issue bonds to raise money in the international capital markets this year at favourable yields, as the global yields are at rock bottom or at negative levels as a result of the unprecedented monetary and fiscal stimulus unleashed last year to fight the economic fallout of the pandemic. 

Budget 2021 also gave hints to the country returning to the international capital markets to partly refinance its foreign borrowings this year, as it seeks to raise Rs.264 billion or approximately US $ 1.4 billion via commercial borrowings.

Sri Lanka has a billion dollar sovereign bond to be settled in July 2021.The gross foreign financing for 2021 is projected at Rs.606 billion, of which Rs.507 billion goes into foreign-denominated debt settlements. Sri Lanka plans to lean heavily on the domestic sources to finance its budget deficit in 2021, with over 70 percent or Rs.1,466 billion slated to be raised through non-bank borrowings, Sri Lanka Development Bonds and bank borrowings.

According to government estimates, Sri Lanka has outstanding foreign debt of US $ 6.9 billion due for settlement this year, composed of US $ 5.4 billion of capital repayment and US $ 1.5 billion of interest payments.

“The government is taking steps to settle this entire foreign debt stock without a dollar short when they come due,” Gammanpila affirmed.