Sept 26, 2013 (LBO) – Sri Lanka has to be careful of borrowing from abroad at high rates, amid low growth and flat state revenues, an International Monetary Fund official said. Todd Schneider who headed an IMF mission in the wake of a successful 2.6 billion US dollar bailout, said Sri Lanka’s public debt dynamics were sustainable there were now downward external risks.
“New external borrowings should be done with a close eye on sustainability, and the need to ensure that investments generate the resources needed to service these obligations,” Schneider said.
Earlier this month Sri Lanka borrowed 750 million US dollars through a state-run bank to finance state spending without the state directly going to markets at a rate of 8.875 percent, about 300 basis points higher than the last bond sale by another state bank.
External risk perceptions have been elevated to all frontier markets as a bubble-like sangfroid with which lenders financed emerging and frontier markets fizzled out during the last quarter.
Ostensibly the cautionary cold water on emerging market bond investors came from expectations of so-called ‘tapering’ of 80 billion US dollars a month money pr