Bond to stabilise rupee

Hiran H. Senewiratne

The Government will obtain the US$ 500 million loan at an annual interest of 8.25 per cent, which will have a long-term positive impact on the economy, Assistant Governor Central Bank, Dr H.N. Thenuwara said.

He said Sri Lanka’s five year, $500 million bond offering has received orders worth more than $1.25 billion, which was oversubscribed three times. The Government will have to pay an annual interest of US$ 41.2 million for this loan, he said.

“These funds will be utilised especially for infrastructure development projects such as Galle Port, Upper Kotmale power generation project, and Norochcholai power plant.

Once these funds are utilised for infrastructure development it would help the country in the long-term perspective not for short-term impact,” Dr Thenuwara said.

The Government will pay only the interest for five years.

If we generate that fund out of Treasury bonds the interest would have been higher than 18 per cent.

The Central Bank said last week it has selected J.P. Morgan, Barclays Capital and HSBC as Joint Lead Managers/ Bookrunners/ Underwriters to the US$500 million international bond issue.

The bond issue was carried out by the Central Bank on behalf of the Sri Lankan Government.

This debut sovereign bond issue is also expected to serve as a benchmark for other corporate borrowers in Sri Lanka, which have the capability of raising money in international capital markets. This US$ 500 million, it would stabilise the current rupee fluctuation, he said.

The success of the severing bonds is a clear indication of the investor confidence for Sri Lanka. The country needs these bonds to take the accelerated development process forward, he said.

The positive response for the $500 million bond offer shows that fund managers and foreign investors have confidence in the Sri Lankan economy.

He said even amidst adverse publicity towards the bond offer they were able to gain a good response for the offer.