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Sri Lanka to go for higher volume with ‘good’ offer for sovereign bond: CB Governor

August 1, 2007 (LBO) - Attractive offers from international banks for a sovereign bond has made it likely that Sri Lanka will raise 500 million dollars rather than 400 million dollars, Central Bank Governor Nivard Cabraal said. "It is likely that we will go for 500 million dollars," Cabraal told LBO. "I think the rates were good."

Sri Lanka had earlier raised 2 and 3 year money at around 150 basis points above the London Interbank Offered Rate.

But now the country is looking at money for 4 years or longer.

Banks have put in bids with rates based on US government bond yields.

Cabraal said the bids had been evaluated and a decision on lead managers may be made at a monetary board meeting today. The board is the governing body of the Central Bank.

Due to historical factors Sri Lanka's central bank has been charged with raising debt for the finance ministry. The Treasury is also represented on the monetary board.

"It is a short meeting, and this is an important decision, so if we do not decide today we will make an announcement next week," he said.

Cabraal said earlier that the government is looking to appoint join lead managers as Sri Lanka was keen to broaden the reach of the bonds among many investors and areas.

International banks like Merrill Lynch, JP Morgan, Barclays, UBS Warburg, HSBC, Standard Chartered as well as Sri Lanka's Bank of Ceylon and Commercial Bank are in the running.

Sri Lanka has been facing a reserve outflow in recent weeks due to a relaxation of monetary policy and analysts say a foreign cash injection is needed to get the monetary system back on track.

Inflation in the year to July shot up to 17.6 percent from 13.00 percent in June and month on month inflation has been rising since May.

Sri Lanka has a speculative BB- rating from Fitch and a lower B+ rating from S&P on account of weak fiscal policy but the country has a good repayment record of its foreign obligations.

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