Using the country's sovereign rating (Fitch BB-, S&P B+), Citibank was expected to sell the bond by mid 2006.
However, an upsurge in violence since last December which has left over 600 people dead, has put a spoke in the wheel, the official said on condition of anonymity.
The rising violence earned the country a downgrade on its rating outlook.
"The Negative Outlook reflects a further deterioration in the security situation in recent days, which has provoked official retaliation for the first time since a ceasefire agreement was put in place in 2002," Paul Rawkins, Senior Director in Fitch's sovereign team said in April, when tit-for-tat skirmishes intensified between the government and the Tamil Tigers.
But continued subsidies doled out for major imported commodities, like oil and fertiliser, as well two years of high inflation and low real interest rates have put pressure on the balance of payments, with a reserve outflow gathering pace in late May.
To plug the gap, Sri Lanka Friday called for expressions of interest from investors for a 2 to 3-year dollar bond, dubbed Sri Lanka Development Bonds.
The first 200 million dollars tranche of the 300 million dollars issue is up for grabs this month from June 13-20.
Central Bank's public debt department said a 2-year 150 million dollars will have a two year tenure while 50 million dollars will be offered for three years, at a premium above the London Interbank Offered Rate.
"Foreign citizens and entities, non-resident Sri Lankans, Sri Lankan dual citizens, authorised dealers, primary dealers and specified companies which have entered into agreement with the Board of Investments are eligible to apply," the public debt department said.
Investors have to pay for the securities on June 28.
The development bonds will mostly target local commercial banks, but the state owned Bank of Ceylon is planning another 250 million 3-year syndicated loan targeting foreign banks.