But now its value is plummeting, causing heavy losses to buyers.
ING Bank was quoting two-way on the Sri Lanka 5-year sovereign bond at 93.0/94.50 on Thursday indicating a capital loss of more than 5 percent for its initial subscribers within a month.
The yield at the bid price is around 10.089/9.68 percent, a sharp deterioration from the issue coupon of 8.25 percent indicating that the spread over US treasuries has almost doubled from the issue premium of 397 basis points.
Ghana which issued a 10-year bond was being quoted by three parties at around 104.75/105.75 indicating a yield of around 7.86/7.57 percent. This was a sharp improvement from the issue price of 8.50 percent.
Ghana has a B+ rating from Fitch compared to a BB- rating for Sri Lanka.
Meanwhile a rupee denominated 5-year bond bond maturing in 2012 that was popular among foreign investors was quoted around 17.00/17.50 percent after opening around 18.00 on Thursday.
Foreign investors bought the rupee bond at 14.25 percent in the first two quarters of 2007 amidst claims by authorities that inflation and interest rates would fall later in the year.
On Wednesday one year Treasuries topped 18.00 percent a week after the government admitted that 56 billion rupees raised from the sovereign dollar bond had already been spent on short term debt repayment and settling printed money.
The government originally claimed that the money would go for infrastructure development, a claim that was widely disbelieved.
Now Sri Lanka is looking for more foreign money.
"A bond sale is certainly an option, especially as there has been an appetite for Sri Lanka," Central Bank Governor Nivard Cabraal told the Bloomberg news agency Thursday.
"We will have to look at the markets stabilizing for the timing and size."
The government spent the 500 million dollars in a matter of days.
The Central Bank has said that sales of rupee bonds also raised an estimated 460 million dollars in the first two quarters of 2007. The uses of the money were not disclosed.
Sri Lanka has a deficit spending economic framework based on heavy public sector recruitment, subsidies and an anti-privatization strategy. .