Foreign holdings of Sri Lankan government securities have exceeded the Central Bank’s maximum limit of 12.5 percent of total outstanding Treasury bills and bonds, the monetary authority’s latest data showed on Thursday.

The Central Bank’s latest weekly economic indicators showed total foreign holdings of government securities was at 471.1 billion Sri Lanka rupees ($3.70 billion) as of Feb. 13, which was 13.85 percent of the total 3.4 trillion rupees.

Net foreign buying in government securities increased by 18.7 percent or 74.2 billion rupees ($582.65 million) in the first seven weeks of this year through Feb. 13, the data showed.

Sri Lanka’s central bank has in the past raised the foreign holding limit in government securities when the island nation struggled for foreign inflows to boost reserves and bridge budget deficits.The International Monetary Fund did not agree to a budget support loan last week.

The 2013 budget had planned on borrowing 62 billion rupees through foreign investments in T-bills and T-bonds, to finance a 507.4 billion rupee budget deficit, which is estimated to be reduced to 5.8 percent of gross domestic product this year.

Nandalal Weerasinghe, deputy governor of the central bank, said the central bank has been accommodating foreign investments into T-bonds and T-bills in line with total requirements for 2013.

“As a policy, we haven’t increased the limit. This is due to accommodating huge foreign demand.

The 12.5 percent will be maintained based on the full year,” Weerasinghe told Reuters.

Sri Lanka’s government securities offer an attractive return of around 10 percent annually.

In Mumbai, Central Bank Governor Ajith Nivard Cabraal said on Thursday Sri Lanka was unlikely to relax foreign investment limits in government securities as the current level is appropriate.

The IMF said last week that Sri Lanka’s economy was facing risks of slower growth, high inflation, lower tax revenue and slow structural reforms.

(Source : REUTERS)