Sri Lanka anticipates US$500mn influx to rupee bonds, US$700mn China loan in 2020

 

Sri Lanka expects a $700 million loan from China's purchases of Chin and rupee bonds and a Samurai and Panda bond to raise dollar inflows in 2020, Nivard Cabraal, Capital Markets State Minister for Finance, said. After forex risk cover provides via a dollar-rupee swap, foreign investors expected to invest about US$ 500 million in rupee bonds in 2020, he said. Inquiries from investors are already arriving, Minister Cabraal said.

In the last two weeks, before the swap announced, there was a net purchasing of rupee bonds. The central bank will also begin work to collect $500 million from bonds denominated in Panda (Yuan) and Samurai (Yuan). Sri Lanka would not default on foreign obligations, and on October 02, he said, a billion US dollar bonds repaid with money credited to investors.

He said the downgrade by Moody's to Caa1 (CCC+ equivalent) of Sri Lanka's sovereign rating sufficiently justified, and the economy was recovering. Cabraal said it was necessary to keep the rupee steady and that the central bank had bought dollars on the interbank market in the last three months.

The central bank purchased 30 million dollars on September 29 to avoid the rupee from appreciating. While the rating agency has downgraded, he said, the country's economic agents are sending money and continuing operations.

As domestic credit slows and inflows not completely expended, Sri Lanka's rupee, loosely attached to the US dollar, appreciates. Sri Lanka reversed the worst import controls since the fall of the Bretton Woods regime in 1971 in April 2020. The import controls introduce to allow capital to repay debt obligations, Cabraal said. Sri Lanka had never lost and would have held the record that he had claimed.

OSL Take: The latest report launched by the Central Bank of Sri Lanka highlights a crucial area of focus in the next five years. The announcement that it would create investments worth Rs. Thirty billion within the next five years is a positive sign for foreign businesses/investors exploring business/investment opportunities in Sri Lanka. They could start exploring investment opportunities in the biodiversity restoration and management sector and even present to the government of Sri Lanka projects that could implement under the program.

Sri Lanka's economic policies and the continuously improving ease of doing business environment have helped promote the country as an ideal business/investment destination in the South Asian region. Therefore, the proposed issuance of the bond would offer a perfect investment opportunity for the discerning investor.

The call by the Central Bank of Sri Lanka for private investment banks has opened up an investment opportunity for foreign businesses/investors. Sri Lanka's economic indicators show the country is heading in the right development path, and the government's development agenda would also help in this aspect. Therefore, foreign businesses/investors could invest in Sri Lanka without having any doubts. The move by the Colombo Stock Exchange and the South Pacific Stock Exchange to reach a deal to collaborate on market development would serve as a confidence booster for foreign businesses/investors to invest in Sri Lankan stocks.

 VBS/AT/23102020/Z_TB2