Former President Maithripala Sirisena’s Government raised a whopping $ 12.75 billion worth of International Sovereign Bonds (ISBs) during the period from January 2015 to November 2019, according to calculations done utilising data provided by the Central Bank of Sri Lanka (CBSL).
During the seven-year period beginning from Sri Lanka’s international bond market debut to 2014 – which contained two presidential terms of Mahinda Rajapaksa – $ 5.5 billion worth of ISBs of both five-year and 10-year bonds were raised.
From its debut in 2007 to the end of 2019, the total amount raised by consecutive Sri Lankan governments stood at $ 18.25 billion. Today, Sri Lanka has nine unpaid ISBs, according to weekly economic indicators of the Central Bank.
Diversifying the deficit financing options, the Rajapaksa Government in 2007 successfully raised $ 500 million via its debut ISB, a part of which, as per the CBSL Annual Report 2007, was used to settle high-cost borrowings made to implement several infrastructure budgets that were included in the Budget 2007.
The year 2008 did not witness any ISBs being raised. The second ISB of $ 500 million was issued in October 2009. Any specific purpose of this particular ISB was not noted in the reports, apart from being a deficit financing tool.
The following year witnessed the issuance of the third ISB of $ 1 billion, which was issued in October 2010. The CBSL Annual Report for 2010 mentions that the issuance attracted an order book of more than six times the value of the bond, reflecting improved investor confidence. It should be noted that this was the second bond the Government issued following the conclusion of the civil war. The Government was able to repay some of the high-cost borrowings from the banking sector with the proceeds of this ISB issuance.
According to available data, the Government in July 2011 issued an ISB amounting to $ 1 billion, benefiting from improved investor confidence and low interest rates prevailing in international markets. As the CBSL notes, the funds were utilised to restructure the Government’s outstanding debt stock with the retirement of some high-cost debt and used to help reduce pressure on domestic resources and interest rates.
The Government successfully completed the issuance of the fifth ISB of $ 1 billion. The realisation of proceeds from the ISB issuance increased foreign investment in rupee-denominated Government securities and the receipt of project loans contributed to higher foreign financing in 2012.
The Government did not issue any ISBs in 2013. The year 2014 – the last year under Rajapaksa’s presidency – witnessed the raising of $ 1.5 billion through ISBs. Under the approved ISB programme for 2014, the Government issued $ 1 billion worth of ISBs. Subsequently, the remaining $ 500 million was raised in April 2014, which was issued at the lowest rate among all offerings by Sri Lanka in the international bond market, the CBSL Annual Report for 2014 notes.
In its maiden year, Sirisena’s Government raised $ 2.15 billion through the issuance of ISBs. In May 2015, the Government successfully issued $ 650 million in ISBs with a maturity period of 10 years. In addition, in October 2015, another $ 1.5 billion worth of ISBs was issued. This was Sri Lanka’s largest offering within a year in the international bond market since the first ISB was issued in 2007.
In 2016, the Government successfully issued its 10th ISB, reflecting improved investor sentiment. Accordingly, the Government was able to raise $ 1.5 billion in July 2016 through the first dual tranche offering of 5.5-year ($ 500 million) and 10-year ($ 1 billion) bonds amidst high volatility in the global markets following the impact of Brexit.
The Government issued the 11th and 12th ISBs in May 2017 and April 2018 respectively, reflecting the continued confidence of investors. Accordingly, it was able to raise $ 1.5 billion in May 2017 with a 10-year maturity. The 12th ISB was issued in April 2018, which was the largest offshore bond offering ever by Sri Lanka, to raise $ 2.5 billion.
Accordingly, $ 1.25 billion each of ISBs were issued with a five-year and 10-year maturity.
In March 2019, the CBSL returned to the bond markets, pricing a new issuance of $ 1 billion five-year and $ 1.4 billion 10-year bonds. In June 2019, the CBSL priced a new issuance of $ 500 million five-year and $ 1.5 billion 10-year bonds.
Within 15 years, the Government has issued 14 ISBs and over $ 8 billion was raised during 2017 to 2019.
Out of outstanding Government foreign debt as of the end of 2021, 47.7% of the total debt comprises concessional loans while the remaining 52.3% is non-concessional loans. Out of these non-concessional loans, ISBs hold a colossal 34.6%, followed by Foreign Currency Term Financing Facilities (FCTFFs).
While the debt to Gross Domestic Product (GDP) ratio grew under consecutive governments, policymakers often engaged in blame games, claiming that previous governments had borrowed more. However, what is important now is not about who borrowed more, but who will bring down the unsustainable debt to GDP figures, and how.