The seven year bonds, would carry a six-month floating rate, based on the London Inter Bank Offered Rate (LIBOR).
Last December, Citibank raised US$ 100 million for the government through a three year syndicated loan, at 95 basis points above LIBOR, but analysts believe total issue costs may have touched 125 basis points above LIBOR.
But analyst say the billion-dollar issue (SLRs 100 billion), which has a longer tenure of seven years, as well as its size, is likely push costs up to 150 basis points above LIBOR or more.
Six-months US dollar LIBOR is now around 4.
7 percent.
But analysts say total issue costs may rise if it is broken up into tranches.
Sri Lanka government faces a 9.1 percent overall budget deficit this year, but a roll back of reforms has made it difficult to earn concessionary donor program loans.
The government has traditionally relied on donors to bridge the external resource gap and plug a part of the revenue deficit.
The government is now tur