As an example, he cited investing $ 5.5 billion to retire or own $ 10 billion of debt at a vast discount.
“This,” says Mangala Boyagoda, “will enable the Government to reduce the foreign debt and consequently improve debt-to-GDP ratio of 82% and thereby increase future borrowing capacity.”
His suggestions are following global financial markets, both debt and equity, suffering heavy losses due to the new coronavirus (COVID-19) global pandemic and uncertainty over the near-term economic trajectory of countries.
“Emerging markets took a heavy toll with EM bond funds exiting from Non-Investment Grade debt, which has exerted significant pressure on EM bond prices and liquidity,” said Boyagoda who is a veteran banker.
Consequently, EM sovereign bond yields rose significantly due to panic selling by investors of EM sovereign bonds.
As a result, says Boyagoda, the Sri Lanka International Sovereign Bonds (ISBs) with 2030 and 2029 maturities with a par value of $ 100 were trading at $ 55, reflecting an unprecedented yield to maturity of 18%.
He said Sri Lanka sovereign bonds trading at $ 55 offered an opportunity to buy back these bonds at nearly half the price. The total outstanding stock of SL ISBs is around $ 15.05 billion at present. ISBs represent the largest proportion of Sri Lanka accounting for around 45% of GOSL total foreign debt, added Boyagod