With the government failing in its attempt to increase the threshold of its local borrowings through the issue of short-term Treasury Bills to the local market, it may be pushed towards issuing Treasury Bonds which carry higher interest rates than Treasury Bills to raise borrowings, say economic analysts.

Since Treasury Bills mature within a year or less, borrowings could be raised at interest rates as low as 07 or 7.5 per cent.

However, when borrowing from the local market through the issue of long term Treasury Bonds the government would have to pay interests rates as high as 10.5 per cent.

With Finance Minister Ravi Karunanayake’s proposal to raise the threshold of local borrowings through Treasury Bills by Rs 400 billion from its existing Rs. 850 billion to Rs. 1,250 billion being defeated in Parliament yesterday (07 April), the government would have to issue long term Treasury Bonds for its commitments like salaries for state sector employees and payment of pensions, point out economic analysts.

With the incumbent government not keen on foreign borrowings, it has hugely increased its local borrowings.

The government resorts to local borrowings through the issue of Treasury Bills and Bonds, with the Central Bank of Sri Lanka as the mediatory.

For the month of April alone the government needs some Rs. 130 billion to pay the salaries, allowances etc for government employees and pensioners.