Foreign Money

February 23, 2007 (LBO) – Sri Lanka Friday announced plans to raise 100 million dollars by selling development bonds to foreign investors, while a drive to sell rupee bonds to overseas buyers has netted in 31.75 million dollars to date, the public debt office said. Bulk of the funds will be used to bridge the country’s 2007 budget deficit which is short of around 400 million dollars as the public purse is straining under the pressure of a 35-year old ethnic conflict.

Sri Lanka raised its annual defence budget by 45 percent to 139 billion rupees (1.29 billion dollars) this year, over the same period 2006, as government troops are locked in arm combat with Tamil Tiger rebels who have stepped up their campaign for a separate state despite a February 2002 truce in place.

The island’s central bank’s public debt department said Friday they were issuing 50 million dollars in development bonds to be placed among local banks and qualified investors.

The issue is priced at a floating rate of six-months LIBOR (London interbank offered rate) plus a premium.

The bank hopes to raise the cash by March, superintendent of public debt C Premaratne told LBO.

A further 50 million dollar tranche is due to come out later in the year, she said.