Foreign holdings of Sri Lanka Govt. securities exceed limit

Reuters: Foreign holdings of Sri Lankan Government securities have exceeded the Central Bank’s maximum limit of 12.5 per cent of total outstanding Treasury bills and bonds, the monetary authority’s latest data showed on Thursday.

The Central Bank’s latest weekly economic indicators showed total foreign holdings of Government securities was at Rs. 471.1 billion ($ 3.70 billion) as of 13 February, which was 13.85 per cent of the total Rs. 3.4 trillion.

Net foreign buying in Government securities increased by 18.7% or Rs. 74.2 billion ($ 582.65 million) in the first seven weeks of this year through 13 February, the data showed.

The Central Bank has in the past raised the foreign holding limit in Government securities when the island nation struggled for foreign inflows to boost reserves and bridge budget deficits.

The International Monetary Fund did not agree to a budget support loan last week.

The 2013 Budget had planned on borrowing Rs. 62 billion through foreign investments in T-bills and T-bonds, to finance a Rs. 507.4 billion budget deficit, which is estimated to be reduced to 5.8% of Gross Domestic Product this year.

Central Bank Deputy Governor Nandalal Weerasinghe said the Central Bank had been accommodating foreign investments into T-bonds and T-bills in line with total requirements for 2013.

“As a policy, we haven’t increased the limit. This is due to accommodating huge foreign demand. The 12.5% will be maintained based on the full year,” Weerasinghe told Reuters.

Government securities offer an attractive return of around 10% annually.



In Mumbai, Central Bank Governor Ajith Nivard Cabraal said on Thursday Sri Lanka was unlikely to relax foreign investment limits in Government securities as the current level is appropriate.

The IMF said last week that Sri Lanka’s economy was facing risks of slower growth, high inflation, lower tax revenue and slow structural reforms.