With foreign debt servicing of USD4 bil, cabinet approves sovereign bond

Feb 16, 2017 (LBO) – Sri Lanka’s Finance Minister says the island's total domestic and foreign debt service payments for 2017 is estimated to be around 1,480 billion rupees.

In a cabinet memorandum Karunanayake said total foreign debt service payments including foreign currency denominated debt amounts to 609.4 billion rupees (4.04 billion dollars) in 2017. Out of the estimated foreign interest payments in 2017, about 77 billion rupees is international sovereign bond coupon payments and total foreign debt service payments, interest and principle payments amount to over 293.3 billion in 2017. “Anticipation of US rate hikes in 2017 as well as the volatility in exchange rate and increasing domestic interest rate environment could induce foreign investors to sell their Sri Lanka T-bill and T-bond holdings prematurely, to minimize any capital losses that they might incur,” he said.

“If this trend continues during 2017, expected level of foreign investment in T-bills and T-bonds would not be materialized.” With foreign investment in treasury bonds and treasury bills of 238 billion rupees at the end of January 2017, compared with 260 billion at the end of December 20l6, this could be further drawn down by foreign investors in 2017. Such a withdrawal would create pressure on Balance of Payments (BOP) with a net foreign currency outflow. Considering these circumstances, the monetary board and the cabinet has given the approval for the issuance of international sovereign bonds in 2017 up to 1,500 million US dollars.