Despite Brexit volatility, Sri Lanka raises $1.5 billion

Sri Lanka's new government secured a $1.5 billion IMF bailout last month to address its balance of payments crisis. In photo: Colombo World Trade Center. Photograph:( Getty )

AFP Colombo, Sri Lanka Jul 12, 2016, 02.39 PM (IST)
Sri Lanka today announced that it had raised $1.5 billion through a bond issue which was nearly four times oversubscribed despite volatility triggered by Britain's to leave the European Union (EU).

The Central Bank of Sri Lanka said orders totalled $5.5 billion for the $1.5 billion bond issue on Monday. Sri Lanka offered $500 million in bonds with a tenure of 5.5 years and $1 billion for a period of 10 years.

The shorter term debt was priced just below 6.125 per cent while the longer tenue was at 7.125 percent, the bank said, adding that the rate was well within its anticipated interest rate.

"Despite the high volatility in the global financial markets following the historic United Kingdom referendum in June regarding their membership of the European Union, the bonds saw strong interests from a wide range of high quality investors," the bank said.

Sri Lanka has already appointed a high-powered panel to study the effects of Brexit on its $82 billion economy as 10 per cent of its exports to Britain are under European Union trade concessions.

Sri Lanka's new government secured a $1.5 billion IMF bailout last month to address its balance of payments crisis after a spending spree to increase public sector salaries last year.

President Maithripala Sirisena's administration sought an IMF bailout immediately after taking power in January last year, but the fund turned down the request, saying Sri Lanka's reserves were at a comfortable level then.

However, the government faced a balance of payments crisis after it implemented its election pledges of lower fuel and utility prices.

Sri Lanka enjoyed impressive economic growth rates averaging more than 8.0 percent for two years after a prolonged civil war ended in 2009.

But the pace has since slowed, falling to 4.8 percent in 2015, down from 4.9 in the previous year, according to official data.