January, 6, 2020
The Central Bank of Sri Lanka plans to engage with international agencies including the International Monetary Funds (IMF) remaining within the overall national policy framework, the CBSL governor said.
"We hope to engage with the IMF and other international agencies remaining within the overall national policy framework, negotiating for changes in the IMF programme where changes are considered required," Prof. W. D. Lakshman said today (6) whilst delivering the Central Bank roadmap for 2020.
During the year 2019, Sri Lanka went through the fifth and sixth reviews of the Extended Fund Facility (EFF) of the International Monetary Fund (IMF) successfully and received the sixth and seventh tranches of disbursements.
The year 2019 also witnessed a deviation of the fiscal outcome from the envisaged targets owing to the weak performance in government revenue collection in the context of stagnant economic activity. Although lower than envisaged, a surplus is expected however in the primary balance in 2019.
speaking further Prof. Lakshman noted that the Central Bank will continue to ensure that the government’s financing requirements are met at the lowest possible cost with a prudent degree of risk, while assuring debt sustainability over the medium term.
The medium term debt management strategy (MTDS) remains focused on containing the foreign currency debt as a share of total debt, improving the average time to maturity (ATM) of the foreign currency debt portfolio, and limiting the debt maturing within one year.
Public debt management encountered several challenges during 2019. Despite these challenges, the Central Bank and the Ministry of Finance proactively interacted with market participants and rating agencies to minimise speculation-driven action by such stakeholders, so that Sri Lanka’s unblemished debt service record remains intact.
During 2019, several improvements were introduced to the Treasury bond issuance system, considering its performance, observations and feedback from 32 market participants to further enhance the market based acceptance arrangement in activating phase three of the issuance system.
"These improvements would help develop a vibrant benchmark yield curve through facilitating the issuance of benchmark maturities and enhance Primary Dealer participation in phase two of the issuance system", Prof. Lakshman said.
"The Central Bank has already initiated raising funds in the domestic market and building buffers within the ALM framework by issuing Treasury bonds in the domestic market, and these operations will continue in 2020 and beyond in line with the forthcoming debt service obligations," he added.
Opportunities to raise funds from alternative bond markets are being considered with the aim of diversifying the international capital market issuance base.