The governor of Sri Lanka's Central Bank, Arjuna Mahendran, is seeking concessional overseas loans to refinance some of the expensive debt the country has received and to reduce its reliance on global bond markets.
“We are looking at tens of billions of dollars” from lenders including the U.S., Japan and the European Union, Mr Mahendran said in a telephone interview with Bloomberg.
Concessional credit will “eventually refinance most of the commercial lending the country has contracted in the last five to seven years.”
“We are looking at hundreds of basis points of savings, which will be announced over the course of the coming year. Our debt-service profile on external debt will become much more benign within a year," Mr Mahendran further said.
Under former president Mahinda Rajapaksa Sri Lanka raised $5.5bn from sovereign bonds with coupons averaging 6.5 percent as it built roads, ports and power plants.
“Moving away from commercial borrowing makes every sense,” said Dushni Weerakoon, head of macroeconomic policy at the Institute of Policy Studies in Sri Lanka. Debt management will get a fillip if the nation succeeds in tapping bilateral trading partners for scarce concessional funding, she said to Bloomberg.
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