The Central Bank’s (CB) move to issue a US$ 100 million dollar bond in a bid to fund infrastructure projects is a gamble according to some economists while others say it is a signal to the international community that the government is confident about its economic position.
“Now that we are having a sovereign rating, the government wants to give a signal that it is confident about its economic position,” one economist said.
The Central Bank on Thursday said that the bonds had been oversubscribed by 1.34 times with total bids received worth $134 million.
The economist said that this move is not without risks. “The debt management where the public debt is at about 83% of the Gross Domestic Product is an issue,” he said, adding that the government forecasts more economic growth helped by more revenue in a post war economy, which will lessen the debt situation, but it is a gamble. “If we can keep the foreign reserves at this level without a balance of payment crisis, it is a good sign, but it is a large gamble,” he explained. “The government is doing this so as not to put pressure on domestic borrowings because these are inflationary,” he said.
Many bankers said that the CB’s move to mop up the excess dollar liquidity will not do any difference to the numbers. “The dollars are only shifting from commercial bank reserves to government reserves,” a banker said.
Some stock market analysts hailed this move saying that the government’s decision to raise dollar bonds to outsiders instead of increasing domestic borrowing would also be most welcome (both by the IMF and the markets).
Arjuna Dassanayake, Vice President Acuity Stockbrokers said that it is a good move, as many expect the US dollar to remain stable or weaken against the rupee within a 1 to 2 year period. “It’s quite predictable that by the current trends that the dollar will remain sluggish internationally and that may actually have an advantage for the government,” he said. He said that the domestic economy will benefit by freeing up liquidity required for expansion of the local companies and thereby help to increase the financial performances and the market capitalization of the quoted companies. |
E-mail
