Foreign interest in G-Secs increases on hopes of economy’s swift recovery

• Total foreign holding of bills and bonds stock stood at Rs.102mn as at April 11, 2023
• As of 2015, foreigners held US$ 3.5 bn worth Sri Lankan treasuries
• SL making fast headway through debt restructuring with both its bilateral and private creditors

Foreign interest in Treasury bills and bonds was seen growing steadily in the recent few weeks reflecting their readiness to bet on the future trajectory of the Sri Lanka’s economy.
As per the data available through the week ended on April 11, foreigners brought Rs.28.52 million equivalent treasury bills and bonds, logging a sharp increase of 38.59 percent. 
Now the total foreign holding of the bills and bonds stock stands at Rs.102.43 million. 

The optimism over the reform trajectory and the recovery story of the Sri Lankan economy may have led foreigners to return to Sri Lankan treasuries after nearly 8 years.
As of 2015, foreigners held US$ 3.5 billion worth of Sri Lankan treasuries, which was equivalent to Rs.453.43 billion in rupee terms.
During the 2015-2019 period, they exited from those holdings as growth impulses in the Sri Lankan economy waned and they looked for better returns elsewhere. 
Foreigners first showed their interest again on Sri Lankan treasuries when the country entered into a staff-level agreement with the International Monetary Fund (IMF) in September, last year.

Sri Lanka is making fast headway through debt restructuring with both its bilateral and private creditors who have already indicated their initial willingness to reset the debt 
servicing schedules. 
Sri Lanka  is seen regaining its debt serviceability in record time as it has cut its imports at least by half and tourism and remittances are fast picking up, while exports largely holding up despite some pressure on textiles and garments. 

Sri Lanka faced Balance of Payment (BOP) crisis due to the loss of foreign incomes during the two years of the pandemic and decided to seek the assistance of the IMF in 2022 to ride the storm.
This was Sri Lanka’s 17th jaunt to the IMF, which suggests that country never addressed the deep imbalances in the economy to prevent BOP crises re-emerging at regular intervals.
On the contrary, India’s last programme with the IMF was way back in 1991.