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The Sri Lanka Development Bonds launched by the Central Bank of Sri Lanka on 1st November, 2001 was heavily over subscribed within the first few hours of the launch. A total of US Dollars 105 Million bids were received for the first tranche of US Dollars 50 Million. The offer was closed at 4.00 p.m. on 2nd November, 2001. the issue was subscribed by the authorised Forex Dealers and Primary Dealers. The offer will be re-open for a further tranche in the near future.

These bonds were issued by the Central Bank of Sri Lanka (CBSL) on behalf of the Government in terms of the Foreign Loans Act No. 29 of 1957. SLDBs are a US Dollar denominated bond issued for the purpose of raising funds from external sources under the approved government borrowing program for the year 2001.

In the past, Sri Lanka has raised funds from international markets successfully. In 1997 Citybank N.A. and ING Bank NV raised funds amounting to US Dollars 50 million by a Floating Rate Note of 3 years maturity. By now, this loan has been fully paid up. In view of diminishing opportunities for raising further funds from international donor agencies due to competition from other developing countries at a time when long term aid flows are declining coupled with difficulties in raising additional funds from domestic markets without causing an adverse impact on domestic interest rates, it has become desirable to explore the possibility of raising funds from external sources. It is expected to collect a total of US Dollars 250 Million from the program of SLDBs.

The following categories of investors are eligible for purchase of SLDBs. (a) Authorised Dealers appointed in terms of Section 4 of the Exchange Control Act No. 24 of 1953.

(b) Primary Dealers appointed by the Monetary Board under the Registered Stock and Securities Ordinance No. 7 of 1937 and the Local Treasury Bills Ordinance No. 8 of 1923.

(c) Citizens of foreign stats whether resident in Sri Lanka or outside Sri Lanka.

(d) Citizens of Sri Lanka who have made their permanent abode outside Sri Lanka.

(e) Citizens of Sri Lanka who have proceeded outside Sri Lanka to take up employment or to set up in business or in a profession.

(f) Bodies corporate or unincorporate established under the laws of a country other than Sri Lanka.

The SLDBs are not sold in the USA or to persons resident in the USA.

Eligible investors can purchase SLDBs from Authorised Forex Dealers and Primary Dealers appointed as Designated Agents by the CBSL to market the product.

The interest on SLDBs will be paid to the registered holders semi-annually based on London Inter Bank Offered Rate (LIBOR) per annum plus a margin of 175 basis points per annum in the first year and LIBOR per annum plus a margin of 225 basis points per annum in the second year.

The maturity period of the SLDBs will be two years with a put option at the end of the first year. The SLDBs are transferable by endorsement, delivery and registration with the Superintendent of the Public Debt of the Central Bank. The minimum denomination of SLDBs will be US Dollars 100,000 and any higher denominations will be in multiples of US Dollars 10,000. SLDBs will be free of income tax and are exempted from stamp duty and withholding tax.

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Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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