Sri Lanka is in the process of borrowing up to $3.5 billion from foreign sources via syndicated loans, sovereign bonds, and sukuk, the country’s finance minister said on Wednesday.
The borrowing plan comes as the South Asian nation seeks to fix its precarious balance of payments position after a sharp depletion of its foreign exchange reserves – a legacy of massive debt piled up under the previous government.
“A $500 million syndicated loan is almost done with Credit Suisse. Once that is done, we will be going for another $500 million syndicated loan,” Ravi Karunanayake told a Foreign Correspondents Association forum.
“Then we will go for the sovereign bond within two to three weeks. We will also go for a sukuk.”
Karunanayake also said the government has appointed eight banks and four non-banking institutions as the lead managers for the upcoming sovereign bond but did not name the institutions. He added the government may look to sell bonds to Chinese and Japanese investors.
Sri Lanka is heavily indebted, partly due to borrowing by the previous government during its nine-year tenure that ended in January 2015. It faces a balance of payments crisis with around $2 billion in foreign outflows leaving the government securities market since October 2014.
The finance minister said the refinancing debt will be used to ease the pressure on the repayment of expensive loans in the past.
The $82.2 billion economy delayed its 2016 borrowing plan until it reached an agreement with the International Monetary Fund (IMF) for a $1.5 billion bailout to help the island nation avert a balance of payments crisis.
The island nation has been taking steps to ease the pressure on foreign debt repayment including requesting China swap some of the $8 billion Sri Lanka owes Beijing for equity in infrastructure projects and offering to sell stakes in its companies to Chinese ones.
It has also planned reforms in loss-making state-owned enterprises while raising taxes to increase government revenue, after repeated requests from the IMF.