Sri Lanka needs foreign money to tide over a gap in the budget as 3-month benchmark interest rates rose to 18.40 percent last week.

Sri Lanka is starting road shows in Singapore, Hong Kong, London and USA this week to market the sovereign bond with JP Morgan, HSBC and Barclays Capital managing the issue.

Analysts say the government has also been dipping into the country's international reserves to settle its liabilities and the proceeds of the bond would help shore up reserves in addition to reducing pressure on the domestic debt markets.

The funds would also help reduce money printing, which has already driven inflation in the capital Colombo to 17.3 percent in August.

Central Bank credit to government hit 108.2 billion in July from 89 billion rupees in May as the government borrowed from the central bank to finance expenditure.

Sri Lanka is hoping to raise 10-year money but the recent turmoil in credit markets had pushed up yields. The roadshows were originally scheduled for last month.

Fitch Ratings gave the bond a 'BB-' rating with a negative outlook and said inflation needs to be brought down and government finances should also be improved.

Standard and Poor's have given the bond a B+ rating, a notch below but with a stable outlook.

Fitch said a worsening of the internal conflict may result in a credit downgrade. Sri Lanka's defence spending for next year is set to increase to 166 billion rupees from 139 billion last year, according to spending plans to be put before parliament this week.