The Public Debt Department of the Central Bank borrowed Rs. 142.68 billion ($1.07 billion) in the four days through Thursday, with Government securities making up 85.2% of the total.
“We are embarking on very heavy investment drive,” Finance Minister Ravi Karunanayake told Reuters.
“We retire the old (Government) securities and take the new. On the investment drive, we consider to push forward capital investments that have been heavily degraded (in the past).”
The borrowing comes as the Government prepares to roll over Rs. 79 billion worth of Treasury bonds next week, with a longer tenure and lower rate, dealers said.
“Most of its revenue measures in the Budget will be realised only in April,” said a private sector financial analyst, who asked not to be named because he is not authorised to speak to the media.
“So this heavy borrowing shows the Government is under pressure due to fall in revenue and rise in spending.”
After the Government took power following an 8 January presidential poll, yields on T-bills have spiked between 134 and 145 basis points, while key policy rates have stayed unchanged at record lows since January 2014.
The rupee has been under pressure since January, when foreign currency reserves fell 13.2% in the month, as the Central Bank paid loans and intervened in markets to stem the decline of the rupee.
The heavy local borrowing comes as Sri Lanka prepares to kick off a non-deal roadshow in the United States this week, followed by Hong Kong, Singapore, and London next week, to update investors on the latest economic situation after the January election of a new President.
The Government revised the 2015 Budget and allocated Rs. 89.7 billion to a salary hike for the bloated state sector, and imposed a retrospective tax for revenue. It has also cut taxes on some imports, including fuel.
The Budget aims to cut the 2015 fiscal deficit to 4.4% of Gross Domestic Product (GDP), the lowest since 1977, a target the International Monetary Fund (IMF) has described as “challenging”. Reuters
Last edited by Teller on Fri Mar 13, 2015 2:53 am; edited 1 time in total (Reason for editing : typing error)