ECONOMYNEXT – Sri Lanka could get market access in about two years, but whether the country should use commercial funding to finance the deficit was another decision, Central Bank Governor Nandalal Weerasinghe said.
“Once we get into a rating back to B grade, I think we will have market access. It is very important for us to be able to access markets,” Governor Weerasinghe said at the Invest Sri Lanka forum organized by Sr Lanka’s SEC and Colombo Stock Exchange.
“But the decision whether we go to the capital markets and raise – this is a completely different decision the government will have to make.”
Sri Lanka is getting multilateral funds and the government is managing state finances in a way that budget deficits are narrowing, allowing most of it to be financed locally, he said.
Sri Lanka had opportunities for debt for nature swaps, he said.
There was interest in sustainable financing.
However, it was important to have market access to tap capital markets in needed, especially if there is some geopolitical shock, Governor Weerasinghe said.
His personal opinion was that without a specific need Sri Lanka should not raise commercial debt.
Sri Lanka’s restructured sovereign bonds are trading around 6 percent.
Under Sri Lanka’s IMF program, bond sales of 1,500 million dollars are projected for 2027.
Sri Lanka’s first bond amortization also falls on 2028.
Having access to capital markets helps roll-over debt analysts, say. Rolling over existing debt allows domestic interest rates to be kept lower than if resources were raised from local markets to buy foreign exchange to settle debt.
Sri Lanka’s at the moment does not have a surplus in the current account of the budget, so reducing outstanding foreign debt involves switching them for domestic debt.
Settling foreign debt (or building reserves) involves a real transfer of wealth, requiring domestic investment to be curbed at an appropriate interest rate as long as monetary stability is maintained. (Colombo/Mar27/2025)
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