New liability Mgmt. bill to raise money above borrowing limit: CB Chief

Dec 07, 2017 (LBO) – Sri Lanka’s Central Bank Chief says the proposed liability management bill will enable the government to exceed the borrowing limit approved by the appropriation bill.

Speaking at a conference, Governor Indrajit Coomaraswamy said the new bill, expected to be presented in Parliament this month, will enable the government to exceed the borrowing cap for specific purposes like liability management.

“Again, there would be another cap, so it’s not a kind of opening the door out completely; but to create some space to borrow some extra money which can be used for liability management,” he said.

An appropriation bill does not enable the government to raise any money more than what is required for a particular year’s deficit.

“So that would be used to raise some additional resources in 2018 to help us to do some switching for the money due from 2019 onwards.”

Coomaraswamy said the government has decided to use the proceeds of all divestitures of public assets for debt repayments.

“So, the 1.1 billion dollars which is going to come in starting from the 9th of December on the Hambantota Port lease will go into a special account for liability management,”

“Foreign proceeds of all divestitures will go into one account and rupee proceeds into another for liability management of foreign and rupee debt.”

Central Bank Governor said Sri Lanka now has a buffer of around 100 to 110 billion to be used for the management of debt repayment peak next year.

“Fortuitously for us, the last five months of this year, there were no debt maturities; so we’ve used that space to raise money,”

“Though there were no maturities, we raised 20 to 25 billion each month since August.”

He said there are seven large issuance days next year and even between those there will be 4 or 5 months where Sri Lanka can raise money to boost the buffer to manage the peak.

“External debt side again as you know there’s a bunching from 2019 onwards,” Coomaraswamy said.

“Though we have something like 600 million US dollars worth of interest payments next year there is no sovereign bond maturity. So that gives us a bit of space.”

Foreign liability management becomes an immediate priority as the economy is facing the largest ever foreign debt servicing requirements, clustered during 2019-2022.

Finance Minister recently said the next 3 years will be crucial with debt repayments amounting to almost 7,000 billion rupees.

This includes the repayment of international sovereign bonds which will mature every year amounting to almost 600 billion rupees.

Finance Minister added that in 2018 alone, the debt repayment amounts to 1,970 billion rupees.

Related: New reforms to create win-win situation for Central Bank & Treasury

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