• Last Update 2024-03-28 14:07:00

Sri Lanka repays US$1 billion sovereign bond

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Sri Lanka has repaid a US$1 billion international sovereign bond (ISB) by the Tuesday deadline (July 27), honouring its debt service obligations, State Minister for Finance Ajith Nivard Cabraal told TimesOnline today.

While the current forex reserve balance is at around $3 billion after the payment of the ISB of $1 billion on Tuesday, the available reserves within the next few months are expected to rise to over $7 billion, when considering the expected inflows and outflows, he said.

The Treasury has transferred the required funds on Monday, he said adding that he has given assurances several times that they will repay the bond but many bond investors panicked due to rating agency downgrades.

Sri Lanka has to make two more payments -- a $500 million bond and $1 billion of debt due next year, he said pointing out that all arrangements have been made to meet these debt obligations.

He noted that several opposition groups have been speculating about Sri Lanka's forex reserve level and attempting to convey a status of instability.

Mr. Cabraal stressed that what is most important is the cash flow, not the reserve level at a given time. Experienced finance managers will keep a close watch on the cash flows as they very well know that temporary fluctuations in the reserve level may occur, but that no instability will be caused if the cash flow is managed successfully, he added.

Sri Lanka has worked out its external cash flows in a manner that every forex loan repayment and interest payment will be made on time, through the careful management of its existing reserves as well as expected inflows and outflows, he said. 

According to the minister, the inflows over the next three months, as per the country's forex pipeline amounts to nearly $2,650 million as follows:

*SWAP from India - $400 million

*SWAP from Bangladesh – $250 million

*Loan from China Development Bank - $300 million

*Special Drawing Rights allocation from the IMF - $800 million

*Central Bank purchases from the forex market in the next 3 months - $200 million

*Inflows from ISBs held by local banks - $300 million

* Expected inflows from the utilisation of underutilised assets - $400 million

The Central Bank has also successfully negotiated a SWAP with the People's Bank of China of a sum of $1500 million, which too, can be accessed and hence could be included as a part of its effective reserves, he said.

In addition, arrangements are being made to roll-over almost the entirety of the SLDB and FCBU loans that are maturing over the balance part of the year, so that such maturities will not lead to a reduction in the forex reserve, he added.

“Also noteworthy is the fact that, with the repayment of the ISB on July 27, most of the Government's foreign debt service obligations for 2021 would have been repaid, allowing the country to replenish its reserves during the remainder of the year,” he pointed-out.

 

 

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