ISB repayment headaches totalling $14 billion stretch until 2030
View(s):With the severe foreign exchange crisis the country is facing, the issue of international sovereign bond (ISBs) has come into focus with a combined total of US$14.050 billion being issued since 2011 upto date, Central Bank data shows.
While an ISB for $1 billion at 6.25 percent interest was floated in 2011 – and which is maturing on July 27 – , the last ISB of $1.5 billion at 7.550 percent interest was issued on June 28, 2019, according to the data showing outstanding ISBs as at December 2020. Thirteen ISBs ranging from $500 million, $600 million to $1.5 billion have been issued between 2011 and 2019 and their maturity periods are upto March 2030 with tenor being 5 years, 6 years, 10 years and 11 years.
While ISBs in recent years have been issued to raise funds to repay foreign debt – they can be issued for any purpose -, the Government has relied on this form of repayment as it comes with no conditions attached (even though at a high interest rates) compared to conditional borrowings from multilateral agencies like the IMF, World Bank or ADB, economists said. ISB interest rates in the Sri Lankan case vary from a low of 5.750 percent per annum to a high of 7.850 percent.
In the case of multilateral agencies like the IMF, World Bank or ADB, the interest rates range from 0.25 percent, 2 percent to 3 percent but these loans are subject to strict conditions like reducing budget deficits, public expenditure, welfare schemes or privatising loss-making state companies, economists said.
Sri Lanka’s first ISB was issued in 2007 of $500 million with a maturity period of five years and a fixed coupon rate of 8.25 per cent per annum.
Sri Lanka foreign reserves is severely constrained in the next few years with huge debt repayments due. According to Fitch Ratings, the debt repayments due in the period 2021 to 2026 are over $6 billion in 2021, $6.5 billion in 2022, $5 billion in 2023, $4.8 billion in 2024, $5 billion in 2025 and $3.8 billion in 2026. This includes ISBs, Sri Lanka Development Bonds and bilateral loans.