SL may Cut Rupee Debt

4 November 2010 05:18 am

Sri Lanka may reduce the amount of government rupee debt available to foreign buyers to channel more overseas funds into private companies, Central Bank Deputy Governor Dharma Dheerasinghe said.

“We want there to be a shift from government debt to corporates issuing debt and subscriptions coming from outside,” Dheerasinghe said in an interview in Colombo yesterday. “We are also now more focused on foreign direct investment and trade inflows.”

Sri Lanka will soon announce easier foreign-exchange rules, to help spur economic growth after the end of the island’s civil war, central bank Governor Ajith Nivard Cabraal said last month. The move will enable foreign investors to buy corporate debt in Sri Lanka, Cabraal said in January.

The easier foreign-exchange rules, together with rising credit demand and imports, will help absorb liquidity in the local money market that has reached 100 billion rupees ($895 million), Dheerasinghe said.

“Much of the liquidity is due to buying foreign currency in the market,” Dheerasinghe said.
The authorities doubled the maximum amount of outstanding treasury debt foreigners can buy to 10 percent in November 2007. They allowed purchases of rupee-denominated treasury bills for the first time in May 2008.

Sri Lanka plans to allow local residents to buy shares of foreign companies and to let Sri Lankan companies list abroad, Cabraal said earlier this year.
Accelerating economic growth and the end of almost three decades of war against separatist rebels in May 2009 has attracted foreign funds to Sri Lanka. The South Asian nation received bids worth $6.3 billion for a global sale of $1 billion in bonds to help repay debt and rebuild after the conflict.

Source: Bloomberg