Sri Lanka digs into reserves to repay maturing sovereign bond worth $1bn

Colombo (News1st) - Sources from both the central bank and finance ministry said on Friday that Sri Lanka has arranged 1 billion US Dollars to repay a five-year sovereign bond maturing this week partly from its declining reserves. The ministry of finance has taken steps to repay, one billion US dollars, for a maturing Eurobond, which was issued during the 2014 government. According to Reuters, Sri Lanka has a total debt repayment of 5.9 billion USD during 2019, out of which 2.6 billion dollars must be repaid within the first three months of this year. It further highlighted that the 1 billion dollar repayment, is the largest debt installment that the government of Sri Lanka has ever incurred. The original plan was to allow three state banks to borrow up to $1 billion from foreign sources before the end of 2018 to pay off the loan. A government official who is aware of the repayment details had told Reuters, “We could not raise the whole $1 billion through state banks. So the reserves were also will be used to fill the gap.” He had declined to comment on how much of the reserves would be used for the repayment. A finance ministry official also confirmed that reserves will be used to settle part of the bond. Meanwhile, a group including Finance Minister Mangala Samaraweera and Non-cabinet minister Harsha De Silva, are in Washington DC to hold discussions with the IMF. Non-cabinet minister Harsha De Silva tweeted that discussions with IMF Managing Director Christine Lagarde were rescheduled, due to prevailing weather conditions in Washington. The finance ministry previously informed that discussions with the IMF will focus on obtaining the final tranche of the extended loan facility provided by the IMF.    

All meetings at @IMFNews including #SriLanka with MD @Lagarde rescheduled as ‘snow storm’ forces them to close. Having lived in US Midwest previously I am surprised how such little snow can shut the Capital down. Jan 14, 2019: Repayment of USD 1 billion ISB MR borrowed due today. pic.twitter.com/uZfuyKIhiD

— Harsha de Silva (@HarshadeSilvaMP) January 14, 2019

When Mahinda Rajapaksa took over as President in 2005, Sri Lanka had a total unsettled debt of  2 trillion rupees. When he left power in 2015, following ten years of presidency, Sri Lanka's total debt burden increased to 7.39 trillion rupees. Four years after the present government came into power, Sri Lanka's total debt burden has increased further to 11.2 trillion rupees. It is clear while Mahinda Rajapaksa has obtained a large number of loans in the ten years that he was in power, the current government has also obtained a sum that is closer to the sum obtained by Mahinda Rajapaksa in the four years they have been in power.