Sri Lanka seeks 400 million dollars

June 12, 2007 (LBO) – Sri Lanka has asked for proposals from international banks to raise 400 million dollars in medium term bonds, banking officials said. Banks that participated in a conference yesterday in Colombo have been given until July 16 to submit proposals with the deal expected to reach closure by October.

The government is seeking the dollars in 4 to 5 year money, bankers said.

JP Morgan, Merrill Lynch, Standard Chartered Bank (Dubai), Deutsche Bank and Royal Bank of Canada, UBS and ABN Amro were among the banks that participated in the conference.

Bankers were asked to propose their own rates and interest payments, whether quarterly or semi-annually priced on the London Interbank Offered Rates (LIBOR).

Other Asian countries of a similar standing have raised funds around 200 basis points above LIBOR, bankers said, but Sri Lanka has previously raised dollars from local banks at lower rates.

Earlier in the year the government also raised more than 400 million dollars by selling rupee bonds to foreign investors, some of whom have been rattled by rocketing interest rates.

The Sri Lanka rupee has come under pressure in the past few weeks requiring outside finance to boost reserves.

A rising budget deficit has pushed up Sri Lanka’s rupee gilt rates above 17.4 percent with the central bank keeping monetary policy tight.

However the rupee has come under pressure and the economy has started to show signs of slowing, requiring additional outside cash to keep it oiled.