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Govt. floats $50m dollar bonds for local banks, first since 2022
View(s):For the first time since Sri Lanka declared bankruptcy in 2022, the government has issued a USD 50 million worth Domestic Dollar Bond (DDB) to raise dollars from local commercial banks alone.
With the maturity period ranging from one to three years, the interest rate of the bond will be determined through competitive bidding. Only locally incorporated licensed commercial banks are eligible to subscribe from December 3 to 10.
The USD-denominated interest rates for the short-term liquidity tool will be paid every six months or annually by the Treasury, subject to local tax regulations.
The Treasury issued the dollar bond notice on Friday after obtaining the Central Bank’s permission in terms of the Foreign Exchange Act, No. 12 of 2017.
Accordingly, serially numbered bonds will be issued at the auction in a minimum investment of USD 1,000,000 and increasing in multiples of USD 100,000. Local banks that subscribe to the DDBs are required to make the payment to the account of CBSL at the Federal Reserve Bank, New York.
The Finance Ministry’s newly set up Public Debt Management Office issued the notice for the debt instrument following a Cabinet decision taken on October 13 based on a paper submitted by President Dissanayake.
The Cabinet paper argued that since sufficient foreign exchange was flowing into the country and the liquidity levels of the local foreign exchange market had been strengthened, a local loan tool could be issued, opening an investment opportunity for local banks.
Meanwhile, a market survey conducted by the Department of Public Debt at CBSL in August revealed that the investors were enthusiastic to invest various quantities up to USD100 million for periods of less than a year up to three years.
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