Govt. to use proceeds from non-strategic asset sales for liability management
Posted on May 10th, 2017

by Sanath Nanayakkare Courtesy The Island

Central Bank Governor Dr. Indrajit Coomaraswamy said yesterday that proceeds from the potential long lease of Hambantota Port and proceeds from the sale or divestment of other non-strategic state assets would be pooled into a separate fund for liability management as foreign debt servicing commitments “will come in a bunch from 2019 onwards.”

Responding to a question from the media in Colombo, on announcing the monthly monetary policy review, the Governor said,” The Prime Minister has articulated this fact and I think the government has accepted it at policy level.

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“Our domestic debt servicing will spike in 2017 and 2018. And then from 2019 onwards, we will have to repay a bunch of external debts. With this in mind, the government intends to put the proceeds from the Hambantota Port deal and other non-strategic asset sales into a separate fund earmarking it for liability management. So, the government’s ability to attract foreign investors to divest in these assets will help its liability management programme, he said.

Coomaraswamy said that with a change of law we may borrow a bit more in the international capital market for liability management.

The Governor, however, pointed out that the real answer to servicing mounting national debt lies in increasing exports. There are some favourable signs in this direction. The United States, Europe and Japan are showing signs of rebounding even at a slower growth rate. If the GSP+ is restored as expected, it will help boost our foreign exchange yield from garment products, rubber etc. The international commodity prices also have rebounded. These three upbeat factors should offset the decline in exports in the first quarter of the year.”

Coomaraswamy also noted that last week’s international sovereign bond issue of US$ 1.5 billion reflected the level of confidence the international capital market has in the Sri Lankan economy.

“Last year, our 10-year bond issue was 554 basis points above U.S. treasury bond rates. This year it was 385, which means it was 169 basis points less. This is a significant improvement of the confidence of the international capital market in the way the fiscal consolidation and the monetary policy are handled , the Governor pointed out.

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