World Bank to allocate USD 250mn policy based guarantee to Sri Lanka for external borrowings

May 29, 2019 (LBO) – The World Bank has offered 250 million US dollars worth policy based guarantee to Sri Lanka for the external borrowings, the Central Bank Governor Indrajit Coomaraswamy said.

According to the Governor, under this facility Sri Lanka can leverage the guarantee four times over to borrow money from the international market at the World Bank’s triple-A rating.

“The World Bank has offered this instrument to us and we are studying it very carefully to see how best we can use it but they have allocated 250 million US dollars to guarantee Sri Lanka’s external borrowings and we can leverage it four times over. So a billion dollars can be borrowed from international markets at the World Bank’s Triple-A rating,” he said.

“It requires some policy reforms but again they want to help us at this time and willing to give us credit for reform that we have already undertaken. They’re willing to gather up reforms we are already undertaken to satisfy the policy reform requirements to access this facility.”

The World Bank first introduced the use of policy based guarantees (PBGs) in 1999 to cover private lenders against the risk of default by sovereign borrowers.

Addressing a recent gathering, the Central Bank Governor Coomaraswamy emphasized that they have already paid off 65 percent of debt repayments this year.

“The large repayments were front-loaded we have repaid to ISP maturities 1.5 billion and now as of today we have paid off 65 percent of our obligations this year and the next ISP maturity is in October of 2020,” he said.

“In the second half of this year and the first half of next year the debt obligations are relatively light. So we have a bit of breathing space.”

Coomaraswamy added that the yield on the sovereign bonds indicates that the markets may still be willing to give the country some money if they go out to the markets in the coming weeks and months.