Feb 22, 2011 (LBO) – Sri Lanka will study market conditions for a bond sale this year, Treasury secretary P B Jayasundera said. “We have to study the market conditions,” Jayasundera said. “In any case it takes about six months preparation to launch a bond.”
Last September Sri Lanka raised a billion dollars from international markets at 6.25 percent most of which were used to settle short-term, high-interest loans.
In the original pro-forma 2010 budget the government listed commercial borrowings of 57 billion rupees (about 500 million US dollars). However the appropriation act or the underlying budget law usually leaves room for foreign borrowings.
The out-turn in November listed eventual foreign commercial borrowings of 112 billion rupees (about a 1000 million dollars). This year only 20 billion rupees (about 190 million dollars) has been listed as commercial borrowings in the original budget for 2011.
Sri Lanka has repeatedly tapped international capital markets in 2007 and 2009 with 500 million dollars each
The state has to spend more money following floods with about 100 million dollars for immediate repairs to roads and irrigation networks.
The government will also pay 350,000 rupees to each family that has lost a house due to floods.
“These expenses can be accommodated within the budget (for 2011),” Jayasundera said.
Sri Lanka is estimated to have cut its budget gap to around 8.0 percent of gross domestic product in 2010, down from nearly 10 percent in 2009.
In 2011 the government is planning to trim the deficit to 6.8 percent of GDP.
Foreign borrowings can reduce pressure on domestic debt markets leaving more of citizens’ savings to be borrowed and spent by themselves for business activity and building houses.
Tighter control of the deficit will reduced the overall debt burden along with interest rates.