WikiLeaks: Rajapaksa’s Bond Issue Raises $500 Million Despite UNP Efforts To Block The Sale
May 24, 2015
International investors, 40% of them American, purchased all $500 million of Sri Lanka’s first-ever sovereign bond issue, despite domestic opposition efforts to block the sale
Sri Lanka’s debut sovereign bond issue raises $500 million despite domestic criticism, the US Embassy Colombo informed Washington.
The Colombo Telegraph found the related leaked cable from the WikiLeaksdatabase. The unclassified cable discusesSri Lanka’s debut sovereign bond issue. The cable was written by the AmbassadorRobert O. Blake on November 01, 2007.
The ambassador wrote; “International investors, 40% of them American, purchased all $500 million of Sri Lanka’s first-ever sovereign bond issue, despite domestic opposition efforts to block the sale. The government offered 8.25% coupon bonds with a five-year maturity, and received orders from investment bankers in Asia, Europe, and the United States totaling about triple the quantity of bonds for sale. The government cited the strong investor interest as an endorsement of Sri Lanka’s economic stability. However, it appears the government chose to set the bond duration to five years because it feared insufficient investor interest in ten-year bonds due to Sri Lanka’s instability. As expected, the opposition United National Party’s threat that a future UNP government would not honor the bonds appeared to have little impact on investor appetite for the bonds.”
“Nevertheless, the opposition continues to question the government’s stated intent to use the bond proceeds entirely to finance infrastructure investment. Central Bank Governor Cabraal assured the Ambassador that the government would indeed use the money for infrastructure. The Rajapaksa government is prone to fiscal irresponsibility, so the opposition’s doubts may be justified. On the other hand, the transparency that international investors require to maintain confidence in Sri Lanka’s sovereign debt may serve as an effective incentive for fiscal discipline.” Blake further said. Read More
