Bloomberg newswires said the size of the bond issue has not yet been decided but earlier reports had mentioned a figure of 500 million US dollars. Sri Lanka has sold two 500 million US dollar bonds in 2007 and 2009.
Last October Sri Lanka sold 500 million US dollars of 7.4 percent bonds at 506 basis points above the US Treasuries rate. In 2007 it sold a similar amount for a 3.97 percent premium.
Sri Lanka also sells rupee denominated bonds to foreign investors which have been popular because they yield in excess of 11 percent a year.
But the report said a ceiling of 10 percent of total outstanding bonds to be issued to foreign investors will remain. "We will be approaching the rating agencies with the selected advisor," Assistant governor of Sri Lanka's central bank, C P J Siriwardena was quoted as saying by Bloomberg newswires.
The rating advisor will be chosen from among six international banks, the report said.
Sri Lanka has a rating of 'B' from Standard & Poor's, five levels below investment grade, and a 'B+' rating from Fitch. Both agencies raised the outlook on Sri Lanka's rating after the country struck a deal with the IMF in 2009.
The IMF deal which was suspended in February 2010 on a runaway budget deficit resumed yesterday with the release of a 400 million US dollar tranche and the government promising to keep current spending in check.
Central Bank Governor Nivard Cabraal has said he wants to see the country's rating pushed up to investment grade by 2013.
"With the expanding growth figures and International Monetary Fund installment, investor perception is high," Siriwardena was quoted as saying.
In Sri Lanka state debt is raised by a unit in the Central Bank. The Central Bank raised the country's growth forecast for 2010 from 6.5 percent to 7.0 percent last month.