CB expects all fund raising to end in 1Q

Meanwhile Governor Coomaraswamy told Mirror Business that the Central Bank will start the process to raise at least US $ 1 to US $ 1.5 billion via issuing dollar denominated international sovereign bonds (ISBs) in a matter of days. The Cabinet has approved a proposal to raise up to US $2 billion via ISBs, he said.
Coomaraswamy said that raising funds via Panda and Samurai bonds are still on the cards. The Central Bank was earlier planning to raise US $500 million via Panda and Samurai bonds. However, he stressed that the interest rates have to be cheaper than dollar denominated ISBs. 

Reasoning the move to approach international financial markets at this juncture despite the high cost of financing due to rating downgrades, the Governor said: “The job of the Central Bank is to prepare for the worst and we learnt a lesson on October 26; we don’t know what the political tsunamis ahead of us are. Hence, we have to plan and get this money as soon as possible. We will move as quickly as possible and collect all the money we need for this year.” 

He also said that US $300 million loan from Bank of China (BOC) is expected to be received by end of February and the loan can be extended up to US $1 billion later on. 

The government also expects another US $500 million from China Development Bank in February from an eight-year syndicated loan that was entered into in October. 

Meanwhile, he said State-owned National Savings Bank (NSB) is in negotiations to raise US $750 million on behalf of the government and Bank of Ceylon and People’s Bank together are likely to raise US $200-300 million. 

The Central Bank expects all planned borrowing to be completed within the first quarter of this year as Sri Lanka has a further US $1.6 billion in external debt repayments in the first quarter of this year excluding the US $1 billion ISB maturity settled this week by partly utilising foreign reserves. 

Dr. Coomaraswamy said that due to enactment for Active Liability Management Act, the Central Bank can pay off high interest borrowing at early stages by borrowing when interest rates are down. 

“The Activity Liability Management Act enables us to go to the market opportunistically to raise the money purely for liability management. 

If interest rates go down, we can go to the market and borrow more money and pay off more expensive debt. We can extend maturities, reduce... etc that’s what Liability Management Act does,” he said.