Sri Lankan central bank Governor Arjuna Mahendran is seeking concessional overseas loans to refinance costlier debt and reduce reliance on global bond markets, Bloomberg reported.
“We are looking at tens of billions of dollars” from lenders including the U.S., Japan and the European Union, Mahendranwas quoted in the report in a telephone interview from Colombo. Concessional credit will “eventually refinance most of the commercial lending the country has contracted in the last five to seven years.”
Under former President Mahinda Rajapaksa Sri Lanka raised $5.5 billion from sovereign bonds with coupons averaging 6.5 percent as it built roads, ports and power plants following the end of a civil war in 2009. Maithripala Sirisena ousted Rajapaksa in January’s presidential polls by pledging a more balanced foreign policy, and is tapping countries including India to reduce reliance on China to fund development.
“Moving away from commercial borrowing makes every sense,” said Dushni Weerakoon, head of macroeconomic policy at the Institute of Policy Studies in Sri Lanka who was quoted in the report. Debt management will get a fillip if the nation succeeds in tapping bilateral trading partners for scarce concessional funding, she said.
“We are looking at hundreds of basis points of savings, which will be announced over the course of the coming year,” said Mahendran. “Our debt-service profile on external debt will become much more benign within a year.”