GoSL to make $ 1 b bond payment today 

  • Bond maturity tomorrow

By Imsha Iqbal 

The Government of Sri Lanka is expected to settle a $ 1 billion-worth International Sovereign Bond (ISB) payment today (26) that is maturing tomorrow (27), The Morning Business learns. 

Speaking to us, State Minister of Money and Capital Market and State Enterprise Reforms Ajith Nivard Cabraal stated yesterday (25) that the said bond of $ 1 billion will, in fact, be paid today, keeping the country’s untainted record of never skipping or defaulting an external payment. 

In July 2011, the Government issued an ISB amounting to $ 1 billion. The issue had a maturity of 10 years at a fixed rate yield of 6.25%. According to Central Bank of Sri Lanka’s (CBSL) annual reports, the funds were utilised to restructure the Government’s outstanding debt stock with the retirement of some high-cost debt, and helped reduce pressure on domestic resources and interest rates. 

Sri Lanka is obliged to settle about $ 29 billion of foreign currency debt which is due by 2026. Whereas, with aviation restrictions that are in effect due to the ongoing pandemic, interruptions in economic activity in the country, Sri Lanka only had foreign exchange reserves of $ 4.5 billion by the end of April 2021 which fell closer to $ 4 billion in the following months. 

Last week (19), Singapore-based Moody’s Investors Service placed Sri Lanka as Caa1 rating foreign currency long-term issuer as well as  the senior unsecured debt ratings under review for downgrade. Issuing a statement, the investors service said that the decision was made due to the fragile external liquidity position of the country. 

Meanwhile, Fitch Ratings recently noted: “Moody’s expects Sri Lanka’s foreign exchange reserves to continue declining from already low levels, further eroding its ability to meet sizeable and recurring external debt servicing needs, and increasing balance of payment risks. Extremely weak debt affordability – with interest payments absorbing a very large share of the Government’s very narrow revenue base – compounds the debt repayment challenge.” 

The investor’s service highlighted: “The planned IMF SDR allocation would also add $ 780 million to reserves. These resources should enable Sri Lanka to meet its remaining debt maturities through the rest of this year, including a $ 1 billion international sovereign bond maturing in July. However, the authorities have yet to specify their plans for meeting the country’s foreign currency debt-servicing needs for 2022 and the medium term. They have consistently indicated that they do not plan to seek programme financing from the IMF,” indicating the financial situation of the country at the moment. 

Earlier, the Governor of the Central Bank of Sri Lanka (CBSL) issued a statement regarding the foreign currency liquidity in the domestic market over the concerts raised by the business and the investor community: “The conditions of foreign currency liquidity observed in the domestic market at present are temporary and are driven by excessive speculative activity. We request these operators in the market to remain calm and not fuel undue speculation, which is not in the national interest, as the careful management of the situation without undue disruption, will result in a beneficial outcome to the country as a whole.”

GoSL to make $ 1 b bond payment today