Borrowing Spree

A series of Reconstruction bonds are due to hit the market later this year, while the remaining US$ 91.5 mn of the US$ 250 mn development bonds will be issued later this month.

rnrnReconstruction bonds will be issued in rupee and dollar denominated notes. Of this, the bank is looking to raise US$ 300 mn for a five-year tenure, while around Rs. 10 mn is expected to come through a ten-year debt paper, Central Bank
quote s Deputy Governor, W A Wijewardene told Lanka Business Online.

rnrnHe said the new dollar denominated debt paper is likely to come with a rating. Sri Lanka has yet to seek a sovereign rating despite successfully raising smaller dollar denominated issues in the international market.

rnrnWith the renewed optimism of a negotiated settlement to the ethnic conflict, the government is once again looking at obtaining a sovereign rating.

rnrnldblquote The international markets would like to see us get a rating before we come to the market,
dblquote says Wijewardene adding that the bank is talking to Fitch Ratings, Standard & Poor
quote s and Moody
quote s.

rnrnSri Lanka
quote s debt service ratios have hit an all time high this year with the government spending nearly 95 percent on its revenues on interest payments.

rnrnGovernment expenditure is estimated at Rs. 327 bn, but revenues are expected to fall short to Rs. 278 bn. ldblquote We are short of another Rs. 300 bn to Rs. 350 bn for recurrent and capital expenditure,
dblquote says Deputy Finance Minister, Bandula Gunawardene.

rnrnIssuing longer-term debt coupled with series economic reforms is the way ahead, Gunawardene said.

rnrnWijewardene said the bank is looking at replacing expensive short debt paper with longer maturities to ease the situation.

rnrnThe government is also banking on peace dividends to help out in the economic recovery this year. Sri Lanka
quote s growth domestic product or GDP contracted to 1.3 percent last year, the first since post independence 50 years ago.

rnrnBut its rebound has been slow so far. According to the Central Bank
quote s provisional data, first quarter GDP is estimated at 0.1 percent. Second quarter growth is expected to be higher due to an improvement in the agriculture sector.

rnrnDespite the numbers falling short of expectations, Gunawardene is optimistic that growth levels will accelerate in the third and fourth quarter, enabling the economy to post a 3.75 percent growth.rnrn