UNP says proposed US $ 750mn term financing facility by NSB illegal

• Ravi K questions who gave orders to NSB when there is no Cabinet, FinMin
• Says not advisable to go for TFF now when interest rates are significantly high
• CB in November said it has received parliamentary approval to raise additional funding for future debt repayment 

By Yohan Perera 
The United National Party (UNP) yesterday charged that the attempts to raise up to US $ 750 million by the state-run National Savings Bank (NSB) through a term financing facility (TFF), were illegal. 

UNP MP and one-time finance minister Ravi Karunanayake yesterday at a media briefing questioned as to who gave the orders to NSB to go for a TFF at a time there is no Cabinet to approve such and when there is no finance minister to make a decision on it. 

He also said it is not advisable to go for a TFF at a time such as this, when the interest rates have gone up significantly. The TFF is expected to be raised at a fixed rate or at a floating rate, linked to a six-month LIBOR or its successor with a maturity period of one year, two years or three years. 
The entire proceeds of the TFF are to be utilized for investing in US dollar-denominated Sri Lankan Development Bonds. 

NSB was to shortly invite financing proposals from international banks with assets over US $ 100 billion directly or through arrangers for the proposed TFF. 

According to the Central Bank, the proposed TFF is a buffer-building exercise for the upcoming debt repayments in 2019.

Central Bank Governor Dr. Indrajit Coomaraswamy in November said up to US $ 1 billion would be raised by NSB, People’s Bank and Bank of Ceylon through as a TFF from the Middle East, before the end of this year. 

He said this is a result of a mission to the Middle East undertaken by the Central Bank and these three banks with two other systematically important private banks to explore the possibilities to raise funds for future debt repayments.

Parliament, just before the current political crisis was triggered on October 26, had passed a resolution to raise Rs.310 billion (approximately Rs.1.75 billion) by way of loans in or outside Sri Lanka for Active Liability Management by the Government of Sri Lanka.

Sri Lanka has to settle a US $ 1 billion sovereign bond maturing on January 15, 2019 and another US $ 500 million sovereign bond maturing in April.