Sri Lanka, for the second time this year and ninth time since 2007, is tapping the international market place to prop up the country’s weak finances with a benchmark sovereign bond issue up to US $ 1 billion. 

Bloomberg wire said the bond issue which has a US $ 500 minimum limit, was launched at a price guidance of 7 percent.  

Reuters in a brief note said the order book for the bond has already exceeded US $1 billion in Asia.

“They would be going for the issue now to plug the budget gap with revenues falling short. This will help bolster the currency, at least in the short term, and also ease pressure on interest rates,” Sanjeewa Fernando, a Colombo-based strategist at CT CLSA Securities was quoted as saying to Bloomberg.

A 10-year sovereign bond issued by Sri Lanka this year at 6.125 percent at a price guidance of 6.375 percent was quoted around 6.5/6 percent in the secondary market, the Bloomberg wire data showed. 

Citigroup, Deutsche Bank, HSBC and Standard Chartered Bank are said to be marketing the bond.

Standard & Poor’s Ratings (S&P) assigning ‘B+’ rating to the issue yesterday said the proposed bond has a 10-year maturity period. Fitch Ratings assigned the issue with an expected rating of ‘BB-‘with Stable Outlook. 

“The sovereign credit rating on Sri Lanka reflects the country’s relatively low wealth, improving but still moderately weak external liquidity, and a high government debt and interest burden,” S&P noted.

“In addition, while the government has recently taken steps to strengthen governance, we consider the current gaps in institutional capacity to pose risks to Sri Lanka’s institutional and governance effectiveness. 

These rating constraints weigh against the country’s robust growth prospects,” the rating agency added.  

Sri Lanka’s budget deficit for 2015 is estimated to hit 6.9 percent of the GDP against the projected 4.4 percent amid higher expenditure and legislative debacles in approving revenue proposals in parliament. 

A senior economist in the country recently recommended Sri Lanka to go for another International Monetary Fund (IMF) bail out before the economy hits a crisis point. 

The factors that were listed by S&P as assisting Sri Lanka’s growth were government investment, including measures to reconstruct the northern districts, the improving financial performance of public enterprises, increasing tourist arrivals, and declining inflation, which the rating agency expects to remain in the single digits.