Capital markets, Infrastructure bonds – real MVP’s in Cyclone Ditwah Recovery
With Cyclone Ditwah damaged infrastructure needing quick rebuilding, it is important for the government to not be a burden to the budget and the IMF Programme that is currently ongoing, which is why the capital market is a top funding option in this regard, Professor Harendra Dissabandara, Chairman Securities and Exchange Commission (SEC) said.
In this national disaster, if the government uses its existing resources, it will affect the budget. That is why this exercise needs other forms of financing.”
Noting that the Ditwah disaster is huge and much bigger than the tsunami, it will take a longer time to rebuild, he told the Sunday Times Business adding that it is feasible for a commercial fund to be used to develop the infrastructure projects.
“A public-private partnership fund can be set up with the tracking system for infrastructure projects such as the highways, etc where local and foreign investors can be called upon to participate. Finally, projects, which have cash flows which are profitable and dividends can be distributed among the investors. He said infrastructure bonds can also be floated in this regard. “As an example, the relevant municipal council can float its bonds, and securitised future cash flows can be considered by the local urban councils and Pradeshiya Sabhas.”
When asked about certain accounts to which funds can be sent by the public and whether there can be an intervention, he said that at a time like this, this can also be done through the capital market.
Addressing the Sri Lanka Economic Summit recently, Dilshan Wirasekara, Managing Director and CEO of First Capital Holdings PLC, highlighted the significant economic impact of Cyclone Ditwah, estimating costs between US $ 200 million and $ 2.9 billion, potentially reaching 1-3 per cent of Sri Lanka’s GDP.
Highlighting the need for innovative solutions beyond past disaster responses, he mentioned three key areas: infrastructure damage, agricultural losses, and human suffering.
Mr. Wirasekara called for both public and private sectors to implement new capital-raising strategies, especially advocating for a Government-backed Infrastructure Bond to finance reconstruction and support struggling businesses. He noted that traditional fundraising methods are deficient for the scale of the damage, suggesting a need for larger funding amounts, starting from $ 30-40 million up to $ 500 million.
Noting, that the Colombo Stock Exchange and the SEC have introduced numerous financial products in the past 24 months, he said that the current crisis demands immediate action to deploy these tools efficiently. The proposed Infrastructure Bond could draw both domestic and international investors, especially if issued at a negative premium compared to existing government securities yields, Mr. Wirasekara added.
He said the ‘Rebuild Sri Lanka Fund’ was a suitable platform for the bond issuance, highlighting the urgency of activating this mechanism to confront the funding gap and speed up recovery efforts. He noted that foreign humanitarian assistance could further support these initiatives, strengthening the need for a collaborative approach to tackle the economic challenges ahead.
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