REUTERS: Sri Lanka intends to raise up to US $1 billion via foreign currency term financing facility (FTFF) to finance the import elements of development projects specified in the 2017 budget, the government said on Wednesday.
The Ministry of National Policies and Economic Affairs headed by Prime Minister Ranil Wickremesinghe in a statement said the FTFF is expected to be raised at a fixed rate or a floating rate linked to U.S. dollar six-month LIBOR with a maturity of three years or more. Finance Minister Ravi Karunanayake in the coalition government’s 2017 budget announced Rs.567 billion (US $3.80 billion) worth of infrastructure investment, 47 percent higher than what the government had allocated for this year. The government has also planned to borrow a maximum gross foreign borrowing of Rs.450 billion rupees next year, 17 percent lower than this year’s Rs.540 billion.
“The timing is fine for the moment as the global market has priced in the recent policy rate hike,” said Anushka Wijesinghe, Chief Economist of the Ceylon Chamber of Commerce, Sri Lanka’s main business chamber. “In the event the U.S. Federal Reserve tightens the interest rates again, any foreign borrowing could be risky.”
President Maithripala Sirisnea’s coalition government which came to power in January 2015 faced a balance-of-payments and debt crisis early this year, partly due to heavy expensive infrastructure borrowing under the previous administration.
However, a US $1.5-billion three-year loan from the International Monetary Fund has helped to improve investor confidence in the island nation’s economy.