Monday Nov 02, 2026
Monday Nov 02, 2026
Monday, 2 November 2026 06:29 - - {{hitsCtrl.values.hits}}
The Government rejected all bids for a $ 100 million dollar-denominated Bond offered to local and diaspora investors after bidders sought yields of about 12%, a clear sign of the cost Sri Lanka will face when it returns to international capital markets, former Central Bank Deputy Governor Dr. W.A. Wijewardena said.
Speaking at CA Sri Lanka’s 28th Annual Tax Oration on Thursday, Dr. Wijewardena said the Treasury had issued the bond to test the market and had planned to increase it to $ 300 million. Instead, the entire issue was rejected after investors bid at about 12%, he said, citing available information.
“The Government did not want to show in public that the current level of market perception of Sri Lanka demands this high level of interest from the Government. It is a good thing that it did so,” he said.
Dr. Wijewardena said Sri Lanka’s sovereign rating had been upgraded to B-, with further upgrades by rating agencies expected in the first quarter of 2027, but that the country remained in the speculative grade.
“All financial experts present here know that B- is a speculative rating, which in the financial markets is known as junk rating. We are still in the junk rating category, not the investment category,” he said.
He estimated that with the 10-year US Treasury yield, the global risk-free benchmark, at around 5.6%, B- rated issuers faced a risk premium of about 5%, lifting borrowing costs to about 10.6%. Because Sri Lanka had not tapped global markets for four years, it would be treated as a new entrant on its return in 2027 or later and charged a further 1% or so.
“So altogether, the yield applicable to Sri Lanka at the current level of rating is around 11-12%, which is not affordable for Sri Lanka,” Dr. Wijewardena said.
He warned that the problem would resurface when Sri Lanka returns to the market.
“When we go to the market in 2027 or after, this problem will arise. It will be a gigantic task for Sri Lanka to raise this additional foreign exchange to meet the balance of payments gap that we are seeing,” he said.
Dr. Wijewardena also cautioned that the migration of skilled workers was eroding the country’s human capital. Universities were losing two or three academics practically every month, while Central Bank officers were also leaving despite the bank paying the highest salaries, he said.
