Business

Govt. to raise foreign currency term financing 

 

  • Requests proposals from banks, investors 
  • Facility either at fixed or floating rate
  • Denomination in US dollar, renminbi, or yen

By Imsha Iqbal  

The Government of Sri Lanka (GoSL) has requested proposals from banks, institutional investors, and investment houses in terms of raising the Foreign Currency Term Financing (FCTF) Facility at a fixed rate or a floating rate with a maturity period of one year or more in 2021. 

The Ministry of Finance (MoF) announced that the FCTF is anticipated to be denominated in US dollars (USD), euros (EUR), renminbi (RNB), and yen (JPY) for the purpose of financing as well as expenditure per the approval in the Annual Budget. 

The request comes shortly after a fresh influx of $ 1.2 billion to the official foreign exchange reserves of the country early this week, which included $ 787 million in International Monetary Fund (IMF) Special Drawing Rights (SDR), $ 150 million from the swap deal Central Bank of Sri Lanka (CBSL) entered into with Bangladesh Central Bank and another ¥ 2 billion from China Development Bank. 

The statement for the Request for Proposals further stated that the proposals from the aforementioned can be submitted either on a standalone basis, or collectively. 

However, the proposals need to be precise for evaluation regarding its commitment in terms of the proposed composition of the dedicated core project, as well as the related experience of the core project team. 

Further, separate proposals need to be submitted for different currencies. Accordingly, the options based on different currencies need to be proposed on the structure of the FCTF, i.e. size, cost, whether it is fixed or floating, third party expenses, tenure, and repayment, and the detailed execution time table which is required in order to make the FCTF available under the GoSL, while indicating the quantum of funds. 

With regard to the cost, the cost of proposal-submitting entities is necessary to be in a “percent per annum” format in fixed or floating rates. Associated costs need to be indicated on the basis of points, or in US dollars, in each element, including third-party costs. Also, the maturity period that has been intended for the FCTF needs to be indicated in inclusive costs for financing arrangements. Proposals are supposed to be submitted in multiples of $ 50 million, while repayment can be in bullets or tranches, and interest would be paid half annually. 

Moreover, the statement said that drawdown and availability of funds should be within five business days following the finalisation of the documentation. The drawdown is to be by tranches upon mutual agreement. 

The statement emphasised that the proposal itself does not stand as a commitment on the part of the Government to accept proposals, as the Government reserves the right to reject all of the proposals sans assigning any reason, while reserving the right to negotiate the terms of the proposals and engaging with one or more proposal-submitting entities for the FCTF.