Sri Lanka on Wednesday raised nearly a billion dollars through a domestic bond auction after the IMF asked the government to build its foreign reserves amid increased capital outflows. The Central Bank of Sri Lanka said the offer of $830 million was over subscribed by over one and a half times and it eventually accepted bids up to $973.25 million.
The bonds with tenures ranging from one to five years were taken at interest rates ranging from 254 to 411 basis points over and above the London-Inter Bank Offered Rate, which is currently at 1.8 percent for one year.
The bank raised the dollar-denominated bonds through local financial institutions as the International Monetary Fund (IMF) warned that the country's foreign reserves were "below comfortable levels".
Official reserves improved slightly to $5.6 billion at the end of February, up from $5.4 billion a month earlier, but down from $6.0 billion at the end of 2016.
Last June, the government received a $1.5 billion bailout from the IMF after facing a balance of payments crisis.
Earlier this month, the IMF said Sri Lanka's current account remained stable, but the financial account weakened with the resumption of capital outflows.
The IMF also warned that a prolonged drought in the island could raise food and oil imports with adverse impacts on economic growth, inflation, and the country's balance of payments.
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