At a conference on July 11, Central Bank had met investment banks with Governor Ajith Nivard Cabraal explaining the purpose of the bond and Deputy Governor W A Wijewardene making a presentation on the current status and future prospects of the Sri Lanka economy.
Among the international banks present were JP Morgan, Merrill Lynch, Standard Chartered Bank (Dubai), Deutsche Bank, HSBC, Royal Bank of Canada, UBS and ABN-Amro as well as state-owned Bank of Ceylon and People's Bank.
The Investment Banks are expected to submit their offers on the 16th July 2007 and the Central Bank plans to select the Joint Lead Managers by end July 2007.
The Central Bank said the funds would be used for financing infrastructure development programs of the government, though no specific projects were named.
The finance ministry has made similar claims when issuing dollar bonds to the domestic banking system earlier which were called Sri Lanka Development Bonds, but when questioned by journalists, officials were not been able to name a single project that the money would go to.
The earlier claim came at a time when the government said all projects were "fully foreign funded".
"This debut sovereign bond issue will also serve as a benchmark for other corporates in Sri Lanka which have the capability of raising money in international capital markets," Central Bank said.
The issue comes at time when sovereign risk is rising due an intensified conflict and reckless fiscal policy had driven domestic interest rates to 17.4 percent threatening to strangle economic growth. Growth in the first quarter is already down to 6.
1 percent from 7.9 percent in 2006.
Meanwhile the rupee had also come under pressure and economists have pointed out that the central bank's monetary program is also under the threat of being de-railed with money being printed to settle foreign currency needs in June.
An injection of foreign cash is essential to lift the pressure of domestic interest rates and also stabilize the monetary sector.
Sri Lanka has a BB- rating from Fitch, with the outlook being downgraded to negative from stable after hostilities intensified last year.
Fitch said the government budgets had to improve for them to upgrade the outlook, with a national debt of over 90 percent of the 26 billion dollar economy.
This year the deficit is projected at 9.
2 percent of the economy.
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