Sri Lanka foreign funding case strengthened by IMF loan: CB Governor

July 21, 2009 (LBO) – Sri Lanka will have more options to tap foreign investors after it gets a 2.5 billion US dollar standby loan from the International Monetary Fund, Central Bank governor Nivard Cabraal said. Cabraal said he will also be in London later this week to “update investors.”

“Once we get a feeling of their appetite we will decide what exactly to do,” Cabraal said.

“Certainly it will be easier. There will be a significant mood change [after the IMF loan].

Though central bank officials said earlier they planned to raise 500 million dollars from foreign capital markets, Cabraal said there was no decision yet on volumes.

An IMF loan goes directly to the balance sheet of the Central Bank and is invested externally, usually in US treasuries if a country has a peg with the dollar.

In the past IMF financing has been linked with other donor funds which go to the Treasury to help give the budget a breathing space.

But Sri Lanka now also has access to international capital markets. IMF also urged Sri Lanka to seek more donor funding, and cautioned the country on going for short term financing.

In 2007 Sri Lanka raised 500 million US dollars through a 5-year sovereign bon