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External reserves reach US$ 8 b

Sri Lanka’s external reserves will aggregate US$ 8 billion with the proceeds of the US$ 1 billion Sovereign Bond Issue arriving in Sri Lanka today. The value date of the Sovereign Bond Issue was July 20 and the issue date was July 27 which effectively translates to the funds arriving in Sri Lanka today, Central Bank Senior Deputy Governor Dharma Dheerasinghe told the Daily News yesterday. He said that this was an unprecedented level of external reserves amounting to US$ 8 billion which was sufficient to fund six and a half months imports. The US$ 1 billion raised by the government through the sovereign bond issue would be to finance the long term infrastructure projects such as the five sea ports - Colombo, Hambantota, Oluvil, Galle and Kankesanthurai along with the second international airport at Mattala of which the runway was already completed. The proceeds of the bond issue would also go into the funding of the second and third phases of the 900 Megawatt Norochcholai coal fired power project where the first was already over and the second and the third phases were billed for completion by 2013. Part of the proceeds will also be used for the 150 MW Upper Kotmale Hydropower Project which was expected to be completed in the next few months along with the 50 MW Uma Oya Hydro Power project as well. Also in line for funding will be the road and railway upgrading projects. A part of the funding will also be used for the retirement of part time short term domestic debt while the government is also adopting a debt management strategy while reducing the cost of debt. The debt management will also increase which is a part of the debt management strategy. The Government is also in the process of fiscal consolidation in an attempt to reduce the budget deficit to 6.8 percent of GDP. The reduction of the costs of debt is also due to the low interest rates will also help the fiscal consolidation process in a big way as well. Earlier, a record 321 international investors from the United States, Europe and Asia have vied for the just concluded US $ 1 billion Sovereign Bond issue, oversubscribed by 7.28 times personifying the confidence of international investors on the growth prospects and vibrant performance of the Sri Lankan economy. The issue was so successful that there were 321 institutional and individual investors who were enthusiastic and upbeat about the economy that they subscribed 7.28 times of the issue raising US$ 7.28 billion and there was even a high net worth individual who wanted to subscribe to the entire issue single handedly. The apportionment of the bond been 43 percent among the US investors, 30 percent among the European investors and the 27 percent among the Asian investors. The ten member team led by Central Bank Governor Ajit Nivard Cabraal, and comprising Central Bank and Treasury officials participated in road shows in Singapore, Hong Kong, Los Angeles, Boston, New York and London and the investor sentiments were reflected in the numbers by which the issue was oversubscribed. The Senior Deputy Governor also said that the interest rates offered this time was also more attractive than in 2010, despite the same value of the sovereign bond issue at US $ 1 billion and at the same rate of 6.25 percent. Explaining this, he said that the interest rate of 6.25 percent in fact was spread over and above the ten year US treasury Bond rate this year was 3.34 percent against the 3.37 percent last year and as such the spread this year is tighter by 39 basis points. Source: www.priu.gov.lk

 

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