Central Bank Governor Dr. Indrajith Coomaraswamy told a group of exporters yesterday the country’s macroeconomic fundamentals are in pretty good shape and the fourth quarter growth would be favourable.
“We have also raised sufficient funds to meet our obligations pretty much to the middle of next year,” he said.
“I am not saying they are wonderful; but the fundamentals are in pretty good shape,” he said at the National Exporters’ CEO Forum in Colombo last morning.
After the 21 April suicide attacks, the country has seen improved security and retail and manufacturing sectors returning to normal. “We have managed the economic fundamentals fairly well after the attacks and the security forces have done a remarkable job in containing the situation. We all have high level of confidence in the situation now,” he said referring to the security and business confidence.
The Governor said he was in London last week and people around the world now are learning to accept and adjust to one-off bombings and attacks. Explaining why he believes Sri Lanka’s macroeconomic fundamentals are improving, the governor said that on the 13th of May, the International Monetary Fund (IMF) executive board approved the report on the 5th review of the extended fund facility for Sri Lanka. “If our fundamental were not in pretty good shape, IMF wouldn’t have approved it. IMF is used by markets, donors to screen economies on their behalf.”
“I believe those fundamentals would remain fairly robust,” Dr. Coomaraswamy said.
IMF also said in the comments, ‘Sri Lanka has the capacity to raise money to meet external obligations’. Dr. Coomaraswamy noted that Sri Lanka was able to raise funds through two tranches of sovereign bonds recently. Sri Lanka raised 2 billion US dollars from 5 and 10 year sovereign bonds in June and sold 500 million dollars of 5-year bonds for 6.35 percent and 1.5 billion US dollars of 10 year bonds for 7.55 percent. The yield is about 460 basis points above US Treasuries for 5-years and 553 basis points for 10 - years, based on published rates for June 24.
In March, Sri Lanka sold one billion US dollars in 5-year bonds at 6.85 percent and 1.4 billion US dollars of 10-year bonds at 7.85 percent indicating a spread of about 441 basis points above US Treasuries for 5-years and 521 basis points for 10 years.
“This shows key creditors and investors continue to have confidence in Sri Lanka’s economy. Also mass market participation by local investors gave us confidence,” Dr. Coomaraswamy said.
Dr. Coomaraswamy attributed the government’s apparent hurry to borrow to forthcoming presidential and general elections which could create uncertainty among investors.
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