A surge in Sri Lanka's local borrowing from government securities is mainly due to a delay in the issuance of a sovereign bond and repayment of a $500 million eurobond early this year that was not rolled over, the central bank said on Thursday. Net local borrowing through government securities has surged, surpassing the total figure for all of last year, data showed last week, as the new government struggles to pass crucial tax bills.
The central bank of Sri Lanka (CBSL) in an email statement sent to Reuters said the total borrowing through t-bills and t-bonds this year through June 3 has risen by a fifth to 306 billion rupees ($2.3 billion). The bank said in contrast to the $1.5 billion raised via international sovereign bonds (ISB) in the first four months of 2014, the government borrowed only $650 million this year after a delay, and the proceeds were received on June 3.
Due to the postponement of the eurobond issuance this year, the central bank had to repay a $500 million sovereign bond on January 21 using its reserves, the central bank said. "In order to purchase foreign currency from the CBSL to repay the matured ISB, the government had to borrow an equivalent amount of rupees from domestic sources by issuing government securities," it said. It also said all the government's borrowings are within this year's gross borrowing limit of 1.78 trillion rupees ($13.3 billion) approved by the parliament in February. Finance Minister Ravi Karunanayake has said the new government also has to pay off heavy debts built up by the previous administration, mainly for infrastructure projects.