Sri Lanka’s rupee-denominated Treasury bond market has become more competitive and vibrant with the receipt of investments amounting to Rs.150 billion (US$ 1.25 billion) from a record number of 60,000 local and 150 foreign investors, said Minister of State for Finance Ranjith Siyambalapitiya in an interview with the Sunday Times FT.
These foreign investments have been able to stabilise the local and foreign market and it will help further reduce the government’s future cost on interest as well as the interest rates, he added. He pointed out that new investors have entered the Sri Lankan bond market even after the drop in interest rates from 18 -20 % last year to 10-13% today. This was a result of the restoration of peace ending the North East war. He said that all activities in the government Treasury bond market are being carried out in a transparent manner.
These investors are bringing foreign exchange through local commercial banks and they are issued with rupee bonds with the Central Bank purchasing the foreign exchange thereby stabilising the foreign exchange market. This measure will enhance the development of the capital market by broadening the investor base and increasing the competition in the bond market, he said. Foreign investors can purchase Treasury bonds at any time and the government has no intension of curtailing this programme. Minister Siyambalapitiya said that the IMF has not issued any warning to the government against issuing government bonds to build up foreign currency reserves after it released the second installment of a 2.6-billion-dollar bailout.
He said that the government has saved funds from the 2009 budget and supplementary estimates and this money will be utilized to grant salary increases of public sector employees and to bring down the prices of essential commodities although no financial provision had been made for this purpose in the Vote-on –Account passed in parliament recently. He noted that the IMF has not expressed any concern on the government’s move to present a Vote-on –Account paving the way for the new administration to present its budget 2010 after the scheduled general elections .
“The government has developed a convenient fiscal instrument, where Sri Lankans living overseas would have an opportunity to invest in treasury bills and treasury bonds. By doing so, one can earn a very attractive return as well as significantly contribute to the development and prosperity of the country.
Also in order to continue with these initiatives and projects, the government need to raise the necessary funding, and it is in that context we believe that the opportunity provided through the investment in government securities would be appealing, both from a national as well as a profit point of view,” the minister said.