Emphasising on the need for Sri Lanka to maintain adequate reserves to prevent the disorderly adjustment of the rupee as well as build buffers for debt repayment next year, the Governor said the Central Bank had not ruled out the possibility of issuing an international sovereign bond but was currently focusing on several other options.
“The message I would like to convey is while we have large external obligations next year we have been proactive and we have lined up various sources of funding and we feel we will be able to raise the money that is required for Sri Lanka to continue its record of never having missed a single payment,” he said.
Describing the situation as “very manageable,” he noted the Central Bank was trying to maintain its reserves at about $ 8 billion. As of Wednesday reserves were at $ 7.2 billion, which had reduced from $ 7.7 billion earlier due to an Asian Clearing Union settlement, Dr. Coomaraswamy said. However the Central Bank anticipates reserves will end the year at about $ 7.8 billion.
In a recent mission to Oman, Qatar and Abu Dhabi by the Central Bank team and the chairmen and CEOs of five banks including Bank of Ceylon, National Savings Bank and People’s Bank, it was assured they would be able to raise between $ 750 million-$ 1 billion before the end of the year.
“In addition there will be $ 645 million left over from the Hambantota Port lease and the China Development Bank (CDB) loan, which would be available for debt servicing this year. This carryover and what is raised by the State banks together will enable us to meet the $ 1 billion repayment of an International Sovereign Bond, which is due on 15 January. In addition there is another $ 500 million sovereign bond, which is due for repayment in April. The earlier CDB loan of $ 1 billion can be up-scaled to $ 1.5 billion so the Government has decided to do that and that money is expected in February. This will come well in time to meet the April repayment.”
The passage of the Active Liability Management Act raised the borrowing limit to Rs. 310 billion ($ 1.7 billion). This would be the first set of borrowings under the new legislation. Efforts to raise funds via Samurai and Panda bonds have been slow as the Central Bank was awaiting clearance from Cabinet and parliament, which can now be mobilised, the Governor said.
The Central Bank is also in consultation with the Central Bank of Qatar with a senior official flying to hold discussions next week to follow up on the possibility of a swap arrangement between the two Central Banks. The Central Bank is also working on a swap arrangement with the Central Bank of Oman.
“There has been a swap arrangement with the People’s Bank of China, which expired last year but we are now beginning to reopen discussions to see whether the a new swap can be arranged, which can be more flexible than the previous one. The advantage of those swap arrangements is they come to the reserves but they are in the Central Bank’s books and not the Government’s books so therefore the borrowing limit that is set by the Liability Management Act will not be affected.”