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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2521

Sri Lanka Government to borrow US $ 150 million this month

By Ashwin Hemmathagama – Our Financial Correspondent

Colombo, 03 August, (Asiantribune.com): Sri Lanka Government is currently looking at the possibilities in issuing US $ 150 million worth of development bonds this month.

According to industry sources, these bonds would be issued as the Government is trying to avoid the cash crunch it is currently in, created by the excessive deficit spending and increasing budget deficit.

Ceylinco Stock Brokers Economist and Head of Research Division, Inti Mohamed told “Asian Tribune” that the Government issued US $ 300 million worth of bonds at around 130 basis points above 6 months LIBOR (London Inter Bank Offered Rate) in June and is to continue this month.

“The continuous deficit spending higher than the expected budget spending coupled with the current account deficit is causing short term cash management problems for the government. In this scenario it is likely the Government may resort to further borrowing from foreign sources. So, not to cause excessive demand on the rupee which in turn may push the rupee rate higher which is not in the best interest of the monetary policy,” Mohamed said.

“Whilst Sri Lanka is facing the rising oil bill, we need to address this factor seriously; largely because we import 70 per cent of oil from Iran, supported by credit facilities. Whilst the supply credit from Malaysia is commendable it accounts for not more than 20 per cent of oil imports. So all things in the back drop, the government is in need of funds. Probably because it has already factored in the rising costs of the oil import bill,” he added.

- Asian Tribune -

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