Home / TOP STORY/ CB puts ISBs first in quest for debt repayment funds

CB puts ISBs first in quest for debt repayment funds


Comments / {{hitsCtrl.values.hits}} Views / Monday, 25 February 2019 01:43

Facebook

 

  • After yields fall, CB focuses on sovereign bonds

  • Will look to swaps and other options to fill gaps after ISBs 

  • People’s Bank of China offers $1.5b in swap arrangement   

 

By Uditha Jayasinghe

The Central Bank has ‘recalibrated’ its strategy to raise funds to repay debt, prioritising International Sovereign Bonds (ISBs)over bilateral arrangements, but the secondary options include a $1.5 billion swap arrangement with People’s Bank of China.   



Central Bank Governor Dr. Indrajit Coomaraswamy explained that the decision to return to the market was motivated by yields reducing significantly in January, largely motivated by the Government’s signal to continue with the International Monetary Fund (IMF) program and repayment of the $ 1 billion SBI in January. The Central Bank will have to raise $ 5.9 billion to repay debt in 2019 with $ 2.6 billion to be repaid in the first quarter. An additional $ 500 million payment is also due in April.    

“We are in radio silence mode at the moment so I can’t say very much. But the background of our thinking was that earlier, the yields on our bonds spiked sharply after 26 October 2018, so for a while it didn’t seem an attractive option to go down the route of dollar-denominated ISBs, and we were looking at other options.

But now those yields have come down and they are slightly lower than they were on 26 October 2018, so we have recalibrated our strategy and given priority to going for an ISB first. We will see how much money we can raise at reasonable cost and after that we will look at what other borrowing we would have to do to meet the financing gap that remains,” he said. 

The Central Bank is finalising administrative and legal proceedings to access $ 400 million swap arrangement with Reserve Bank of India (RBI). Dr. Coomaraswamy also said they favoured ISBs over swaps as it would be longer term money. The RBI swaps would need to be rolled over every three months, but an SBI would be for a five- or ten-year tenure. The Governor, however, did not give an indication of how much the Government would attempt to raise. 

Last month, Cabinet gave permission for the Central Bank to raise up to $ 2 billion in ISBs. The Central Bank has also said it will go to the market to raise panda and samurai bonds but these would come after the ISBs. The Central Bank has also been offered $ 1.5 billion in swaps from People’s Bank of China and a second swap is also possible from the Central Bank of Qatar. 

“Everything is still on the table, including the panda bond, the samurai bond, and possible term loans,” the Governor said. 

Nonetheless Dr. Coomaraswamy said panda and samurai will take time as it would be the first time such bonds would be issued by the Central Bank while SBIs have been more frequent. A $ 300 million loan from the State Bank of China would also likely take longer as negotiations have to be ironed out.

“We want to raise everything as early as possible so we will keep moving. The great advantage about SBI is its maturity.We can get five or ten years.Things have improved on the SBI front, so that has given us a window, and then we will move to fill the gap. Given our debt dynamics, that is more attractive.” 


Share This Article

Facebook Twitter


DISCLAIMER:

1. All comments will be moderated by the Daily FT Web Editor.

2. Comments that are abusive, obscene, incendiary, defamatory or irrelevant will not be published.

3. We may remove hyperlinks within comments.

4. Kindly use a genuine email ID and provide your name.

5. Spamming the comments section under different user names may result in being blacklisted.

COMMENTS

Today's Columnists

“Sri Lanka’s future lies in producing exportable manufactured goods”: Dr. Howard Nicholas

Monday, 22 July 2019

Drawing lessons from Vietnam’s experiences The Sri Lanka-born economist attached to The Hague based Institute of Social Studies – Dr. Howard Nicholas – addressing a packed audience consisting of the alumni of the Postgraduate Institute of Manag


We should sell our water

Monday, 22 July 2019

When you read the title of this article, you will probably feel disgusted with me as selling our water has been a controversial topic since a long time ago. By the way, I am talking about virtual water trade and you would be surprised to know that we


A voice of compassion amid howls of zealotry

Monday, 22 July 2019

The unrestrained freedom extended by the current regime to a bunch of saffron-clad street vendors of Sinhala Buddhist zealotry is pushing Sri Lanka once again into a cauldron of ethnic and religious convulsion. The nationwide spread and virulence of


Roger Beteille: The man who reinvented the commercial airliner

Monday, 22 July 2019

The visionary engineer, pilot and manager who led Airbus to some its most significant decisions, passed away last month. Beteille, who was the head of French aircraft manufacturer Sud Aviation’s flight testing section, was made technical director


Columnists More