Sri Lanka raises $2.4bn as IMF extends bailout
A power struggle between the president and the prime minister late in 2018 prompted three international rating agencies to downgrade Sri Lanka.
COLOMBO - Sri Lanka has raised $2.4 billion as it returned to the international bond market for the first time since a political crisis triggered rating downgrades, the central bank announced on Friday.
A power struggle between the president and the prime minister late in 2018 prompted three international rating agencies to downgrade Sri Lanka, forcing the government to abandon plans to borrow overseas.
With the end of the dispute, the International Monetary Fund has revived a bailout programme with Sri Lanka, and Colombo has resumed its international sovereign bond sales.
Sri Lanka’s central bank said it went to the market on Thursday following the strong backing from the IMF which last week lifted its suspension of a $1.5 billion bailout agreed in June 2016.
The issue of $1 billion in bonds with a five-year tenure and a 10-year $1.4 billion bond were hugely oversubscribed. Both bonds attracted offers of $7.5 billion, the bank said.
The bonds were bought at an average yield of 6.58% for the five-year tenure and 7.85% for the 10-year bonds.
Finance Minister Mangala Samaraweera told parliament this week that the power struggle between President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe had cost the economy $1 billion in “capital flight” from debt and equity markets.
However, he said the economy was now on the mend.
Because of the political crisis, economic growth slowed to 3.0% last year, the weakest in 17 years, according to the central bank.
The IMF said it expected Sri Lanka’s growth to improve to 3.5% in 2019.