Even more borrowing by government

COLOMBO (News 1st) - Sri Lanka sold $2.4 billion in five-year and 10-year U.S. dollar-denominated bonds on Friday, according to a term sheet seen by Reuters, successfully tapping the international markets at a time the country is facing strains on its finances. Sri Lanka sold $1 billion in five-year bonds with a coupon of 6.85% and $1.4 billion in 10-year bonds with a coupon of 7.85%, shaving 35 basis points (bps) off the initial indicative coupons. The five-year bond attracted over $2.7 billion in orders and 10-year attracted over $4.8 billion in orders, the term sheet showed. U.S. investors picked up most of the bonds, accounting for 39% of buyers on the five-year bonds and 44% on the 10-year ones, according to the term sheet. Last month, Sri Lanka raised its borrowing limit for dollar-denominated bonds to $3 billion, three sources said. The sale of five-year and 10-year bonds comes as the South Asian island nation is struggling to repay foreign loans, with a record $5.9 billion due this year, including $2.6 billion in the first quarter. Sri Lanka used its reserves to repay a $1 billion sovereign bond loan in January and the International Monetary Fund (IMF) last week agreed to extend a $1.5 billion loan facility for an extra year. The bond sale was launched two days after the government presented its budget for 2019 and not long after the end of a 51-day political crisis that caused a sharp fall for the rupee currency. The proposed budget boosted spending on state employees, pensioners, and the armed forces, and promised many rural infrastructure projects to woo voters before two elections. Proceeds from the bond sale will be used “for expenditure sanctioned by the Parliament of Sri Lanka for 2019”, the term sheet said.