IMF sees SL tapping global Bond market for $ 3 b by 2028

Finance and Planning Deputy Minister Dr. Anil Jayantha Fernando

• Projects $ 1.5 b issues each in 2027 and 2028, none in 2026; Govt. says decision is its own
• $ 4.1 b in currency swaps outstanding at end-May; nearly all $ 2.3 b domestic swaps due within a year
• PDMO readies liability management operations, declines to detail strategies as highly sensitive
• Gross reserves at $ 6.9 b in Aug., while EFF program target NIR of $ 944 m

The International Monetary Fund (IMF) projects Sri Lanka will raise $ 3 billion through International Sovereign Bond issues by 2028, but the Government will decide whether to tap global markets, Finance and Planning Deputy Minister Dr. Anil Jayantha Fernando told Parliament yesterday.

The IMF’s combined fifth and sixth review staff report under the Extended Fund Facility (EFF) makes no projection for a sovereign bond issue in 2026, but assumes $ 1.5 billion each in 2027 and 2028, and none in 2029. “These assumptions about borrowing through sovereign bonds are made by the IMF and should not be considered as projections of Sri Lankan authorities,” Dr. Fernando said, adding that the Government will decide periodically whether to issue sovereign bonds after assessing the situation.

Alongside future borrowing, the Government faces short-term foreign currency obligations. Outstanding currency swaps, agreements to exchange currencies now and reverse the trade later, amounted to $ 4.1 billion at end-May 2026, comprising $ 1.8 billion international and $ 2.3 billion domestic. Only about $ 83 million of the domestic swaps mature beyond one year, with the rest due within 12 months. Domestic swaps peaked at $ 2.7 billion in August 2016. There are no outstanding forwards or other short-term foreign currency liabilities with domestic banks, Dr. Fernando said.

Meanwhile, the Public Debt Management Office (PDMO) is strengthening the regulatory framework for liability management operations, which aim to reduce financing, interest rate and currency risks in the Government’s debt portfolio, and is assessing opportune market conditions and available instruments. Dr. Fernando declined to detail specific operations or strategies, describing them as highly sensitive information.

The bond assumptions also feed into the IMF’s projected path for gross official reserves, which Dr. Fernando stressed is not a program target. “The gross official reserves is not a target set out under the IMF EFF program. The relevant program target is the program net international reserves as defined in the published IMF EFF documents,” he said. The program net international reserves (NIR) for the year-end is $ 944 million. Gross reserves count all foreign assets held by the Central Bank, while NIR deducts short-term foreign currency liabilities, giving a narrower measure of reserves the country actually owns.

Gross official reserves have risen from $ 1.85 billion in June 2022 to $ 3.72 billion in June 2023, $ 5.65 billion in June 2024 and $ 6.12 billion in December 2024. They climbed to $ 6.84 billion in December 2025, dipped to $ 6.46 billion, or 3.2 months of imports, in June 2026, and recovered to $ 6.9 billion, or 3.4 months of imports, in August.

The build-up has been driven by Central Bank purchases of foreign exchange from the market, which have slowed. Net purchases fell from $ 1.76 billion in the six months to June 2024 to $ 1.08 billion in the second half of 2024, $ 1.01 billion and $ 0.98 billion in the two halves of 2025, and $ 0.56 billion in the six months to June 2026.

Gross reserves include the People’s Bank of China swap facility. Other than that swap and a marginal amount of encumbered foreign currency balances, reserves are readily available to meet debt service payments or to intervene in the foreign exchange market if needed, Dr. Fernando said. He reiterated that the Central Bank maintains a flexible exchange rate, intervening only to mitigate excessive volatility and to build reserves through market purchases.