Harsha says rumours over snag in $ 1.5 b sovereign bond issue false

Friday, 10 April 2015 00:55 - - {{hitsCtrl.values.hits}}

The Government yesterday described rumours that the $ 1.5 billion sovereign bond issue was facing a snag as “utterly false” and emphasised that it hadn’t gone to the market yet but would do so at the appropriate time. A rumour doing the rounds in the financial and political circles has been that the Government was unable to issue the $ 1.5 billion international sovereign bond to be quoted on the Singapore Stock Exchange since the signatures of Finance Minister Ravi Karunanayake and Central Bank Governor Arjuna Mahendran had not been accepted. The alleged reasons for the failure were that these two individuals’ names figured in a money laundering case and the 30-year Treasury Bond issue fiasco respectively.

The reason for the story doing the rounds is that following the failure, the Government decided to rush in the motion to enhance borrowing by Rs. 400 billion via a Treasury Bill in Parliament which was eventually defeated. “I have heard the same but I can confirm with responsibility that these rumours are utterly false. We haven’t gone to the market due to local and global conditions. We will go for the issue at the appropriate time,” Deputy Policy Planning and Economic Affairs Minister Dr. Harsha de Silva told the Daily FT. He said the spread of these rumours was an attempt to destabilise the system and the Government. The Deputy Minister also said that in recent weeks the Government securities market had seen net foreign inflows, which augurs well. “Confidence among international investors on the Interim Government’s success so far and planned measures to ensure a new strong Government after the election is gathering momentum,” de Silva added. Commenting on the defeat of the motion in Parliament on Tuesday, the Deputy Minister clarified that there was no move to increase the borrowing limit but the attempt was largely to do with better Treasury management. “We needed to be flexible and it was only a Treasury or public debt management exercise to be able to have a mix of instruments to take advantage of low yields at the short end of the market and retire high cost debt at the longer end. The Opposition tried to make a big issue claiming we didn’t have money to pay salaries and therefore we had to borrow Rs. 400 billion. That was complete bunkum,” de Silva said. “The entire requirement for this month is only Rs. 130 billion of which we collected all but Rs. 19 billion more. Now we don’t have private placements but a very transparent public auction system. So we don’t have a ready tap but only weekly auctions. We needed some flexibility. That is what we tried to do to better manage the public debt and bring down the burden on the middle class of this country who pay taxes, to pay for large projects that have been undertaken without money. The Finance Ministry has revealed that there is Rs. 672 billion worth of bills submitted that need to be paid for projects that don’t have proper approval,” he said. “So we need to borrow at the lowest possible cost to the people. That was all that we were trying to do. So absolutely no loss to the Government but a loss to the people. But a section of the Opposition went against the people and they have to answer to the people, not us,” Deputy Minister de Silva added.