Five banks respond to Sri Lanka's call to raise funds from migrant workers via an international bond, despite doubts about the timing and the structure of the issue. Sri Lanka plans to raise US$ 100 million through a three-year international bond issue to pay for upcoming development projects, following twin shocks of the tsunami and surging oil prices.
The government wants the funds to come in next month, prior to securing a country rating from three international rating agencies.
The technical evaluation committee, which is now studying proposals sent by five banks -- local and foreign -- have been given time till October 20, Central Bank's Deputy Governor W A Wijewardene told LBO on Thursday.
The committee findings will thereafter be put before the Monetary Board meeting fixed for Oct.
24.
Officials hope to pick the lead manager before the end of the month.
Once selected, the lead manager has six weeks to raise the cash.
The island is digging deep for extra cash after surging crude prices will see its oil import bill exceed US$ 800 million to US$ 1.5 billion this year, the country's Treasury Secretary P B Jayasundara said last month.
But analysts feel the timing and the structure of the issue could be a problem since the government is looking for quick cash.
For starters, the unrated issue comes as the country is going through the paces of securing a sovereign rating.
Given the urgency creeping in, a syndicated loan, unlike a bond, would be ideal and far cheaper.
"A bond can't go unrated just when the country rating is due few weeks later. It will do more damage than good," said a trader attached to a foreign bank in Colombo.
Despite misgivings, Jayasundara said the government is keen to encourage migrants to take part in the development process.
"Tapping our people working abroad through this bond issue, is another avenue to mobilise remittances besides non-resident foreign currency deposits," Jayasundera said.
To encourage wider participation, he said that the government was looking at fixing the minimum subscription at US$ 500.
"However, the structure would depend on what the lead managers think is viable.
"
A large chunk of Sri Lanka's private remittances flows from some half a million locals working overseas, mainly in the middle east.
According to Central Bank data, net private remittances were up 23 percent to US$ 1,075 million for the first eight months to Aug.
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2005.
-Mel Gunasekera: mel@vanguardlk.com