Sri Lanka to borrow $5 bln in 2018, including sovereign bonds


COLOMBO, Jan 3 (Reuters) - Sri Lanka's cabinet has approved plans to borrow some $5 billion in 2018, including $2 billion of sovereign bond sales, a government spokesman said on Wednesday, as it prepares to refinance big debts that fall due this year.

The start of repayments for expensive infrastructure foreign loans starting this year has left the island nation facing a debt crisis.

It must repay an estimated 1.97 trillion rupees ($12.85 billion) in 2018 -- a record high -- including $2.9 billion of foreign loans and a total 823 billion rupees of interest.

A government document seen by Reuters said banks that lead-managed a $1.5 billion sovereign bond for Sri Lanka last year believed it could sell 10-30 year bonds at an interest rate of 5.50-6.50 percent in early 2018 based on current markets.

Central bank governor Indrajit Coomaraswamy told reporters the government should go for the sovereign bond as early as possible as there is ample money in the global capital markets ahead of expected rate hikes by the U.S. Federal Reserve.

"If we are to go for a sovereign bond and bring in a significant amount of money, it will reduce the pressure on interest rates and exchange rates as soon as the money comes in. It's better if we go early," he said.

The government is trying to pass a Liability Management Act that would allow it to borrow more than budget limit as it tries to manage a heavy burden of debt repayments over the next two years. It also plans to reschedule some loans.

The $81 billion economy expected foreign currency outflows of $5.6 bln in the next 12 months including loans, securities, and deposits, compared with a current $8 billion in foreign exchange reserves, according to official central bank data.

($1 = 153.6000 Sri Lankan rupees)

This article appears in: Politics , Fundamental Analysis , World Markets , Economy , Bonds

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