Sri Lanka is looking to tap global capital market to borrow up to $1.5 billion through sovereign bond before the end of April and planning for a new IMF program, its Finance Minister said on Monday, as it considers cheap loans to cut commercial debts.
The new Government has said the real total debt at the end of 2014 including State-Owned Enterprises’ borrowing was 88.9% of Gross Domestic Product (GDP), over the previous Government’s official figure of about 75% of GDP.
Finance Minister Ravi Karunanayake has planned to cut the $76 billion economy’s fiscal deficit to 4.4% of GDP this year, the lowest since 1977, lower than last year’s 5.2% with Rs. 258 billion ($1.94 billion) foreign borrowing.
“Maybe $1 billion to $1.5 billion, which we are contemplating and looking at,” Karunanayake told Reuters in an interview when asked if the Government was contemplating a sovereign bond.
He said Sri Lanka would go to the market within the 100 days set out in the new Government’s program. The Government’s first 100 days are up on 23 April.
Sri Lanka has borrowed $5.5 billion through seven sovereign bonds since 2007 and it has tightened its yields. It last went to the market in April 2014 and raised $500 million by selling five-year euro bonds at a yield of 5.125% a year.
Heavy commercial borrowing for infrastructure, most of it from China, under former President Mahinda Rajapaksa has put the new Government under pressure to pay debts.
Karunanayake said Government officials would meet IMF officials in Washington on 17 February to discuss a new program.
“We will ensure they will not be stipulating conditions on us. We expect the maximum that can be given at the best possible rate,” Karunanayake said.
The IMF finished disbursing a $2.6 billion loan to Sri Lanka in 2011, but the previous Government failed to secure another it requested early last year for budget financing.
The rupee has been under downward pressure since the Government came to power on 9 January and on Monday it was quoted at 132.80/133.00 amid moves by the Central Bank to limit its fall through a combination of moral suasion and lowered forward premiums.
“We will hold it firm at this level. There won’t be any devaluation at all,” Karunanayake said.
He also said there would be a “very small” correction in T-bill yields to attract foreign investors to the Government securities.