Governor Lakshman Arjuna Mahendran | Pic by Chandana Wijesinghe

Sri Lanka is planning to raise around US$ 3 billion this year via a variety of funding sources in order to bridge the approximately US$2.5 billion funding gap in the Balance of Payments.

According to the Governor of the Central Bank, Arjuna Mahendran, Sri Lanka plans to conclude discussions for an IMF’s three-year Extended Fund Facility (EFF) of about US$1-1.5bn next week, seeks assistance from the World Bank, go in for a Sovereign Bond and also look at tapping funding from Panda Bonds in China, for which the People’s Bank of China has given Sri Lanka approval.

Mahendran said Sri Lanka expects to start issuing bonds in China’s domestic Renminbi market in about three months, aiming to raise cheap funds worth about US$ 500 million –US$ 1billion.

“This is very exciting. We can now start raising Renminbi finance much cheaper than in US dollars,” the governor said highlighting that he expects to raise funds at around 5% interest on an annual basis.

Funds raised in China would be used to pay Chinese firms coming to build infrastructure in the island or as government counterparty funds in projects, he said adding that the next stage is to advertise for lead managers, either Chinese investment banks or international ones.

“Then we have to do due diligence measures and get a rating by a Chinese rating agency in the domestic Renminbi market,” Mahendran said pointing out that this would take about three months.