|Foreign currency surplus to
bring $ to Rs. 110?
predicts rupee to remain stable for one year
Analysts think otherwise
Economists were however, of the view that it would be temporary
since there is a foreign currency surplus in the country right
now and not sure as to how this money will be disbursed.
Many analysts think that this would be used for debt serving in
2007 after the two year moratorium given to tsunami affected
countries in 2004.
By Rathindra Kuruwita
The foreign currency surplus is likely to bring the
dollar to Rs. 110 , highly placed government sources predicted
yesterday. He said that it would stabilise the country’s money
market which was falling apart due to inflation.
He told The Nation that the dollar is likely to remain between
Rs. 110 to Rs. 111 for a period of 6-12 months which would
enable the Central Bank to maintain financial stability for some
Although it can be brought down further, he said the government
has decided to stabilise the exchange rate at this level due to
concerns over the rupee value of the export earnings.
He said that there is a great possibility that the US $ 500
million bond will be realised by October 24 and was also
optimistic that the influx of dollars will be a boost to the
Out of the US $ 500 million, the government has decided to
infuse at least US$ 150 million to the Treasury. This would mean
that the government could pay back money raised through local
Treasury Bills. That capital will go back to the local banks and
will be available to Sri Lankan entrepreneurs at a lesser
interest rate and boost local businesses he said.
The remaining US $ 350 million will be used to restart US $ 3800
million worth foreign funded projects which are at a standstill
due to the lack of local component, he added.
“Since Sri Lanka is in the middle income group countries, the
World Bank and the Asian Development Bank will only give us a
certain percentage of the loan required for infrastructure
projects. For example the outer circular road, encompassing
Kaduwela, Kadawatha and Katunayake areas, has been stalled
because the Sri Lankan government does not have the funds to
acquire land and pay compensation accordingly,” he said.
He added that the Bond issue will be listed in the Singapore
stock market shortly.
The government held road shows in Singapore, Hong Kong, London,
Los Angeles, New York and Boston and finalized the deal in New
Central Bank governor Nivard Cabraal made presentations at these
road shows to lure prospective investors.
The banking consortium, which was selected out of 11
facilitators, comprised Morgan of United States, Barclays of the
United Kingdom and HSBC of Asia while Bank of Ceylon was a co
partner in Sri Lanka.
There were two offers, mainly five to ten years and it was
oversubscribed by 3 folds. The Central Bank governor and the
Treasury selected 30% from the Asian market, 30% from Europe and
Middle East and the balance from the American market.
The interest was fixed at 8.25% with the government securing the
US$ 500 million bond.
Already the Treasury bonds invested have been reduced by 0.22%
which means that they would be enough to meet the interest that
will be accrued owing to the 8.25% interest rate on the US$ 500
million dollar bond.