The sale will target professionals and Sri Lankans living abroad, he said during his budget speech.
The statement declined to specify the sale amount or the time frame of the issue. However, the Central Bank said earlier that the government will issue the bonds next year.
The island is desperate for cash to meet spiraling oil costs and tsunami related expenses that has blow a hole in the country's finances. Sri Lanka also leans heavily on local borrowings to meet its funding requirements.
To set the tone for its maiden bond issue, two international rating agencies on Thursday assigned speculative or junk bond ratings.
A junk-grade rating denotes concerns that borrowers may not always be able to honour debts in full or on time.
New York based Standard & Poor's assigned B+ rating, four levels lower than investment grade. The outlook is stable, the firm said.
Fitch Ratings gave the nation a BB- rating, which are three notches lower than investment grade, but with a long-term stable outlook.
"BB ratings indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time," according to Fitch. "However, business or financial alternatives may be available to allow financial commitments to be met."
"This places us (Sri Lanka) at a respectable beginning with the universe of rated sovereigns. These positive developments will be further consolidate," Rajapakse told legislators while outlining the government 2006 budget.
However, the dual ratings highlights the high level of government indebtedness and weak revenue mobilisation, together with political and security concerns, which stem from a fractious political environment and the unresolved issue of a peace settlement with Tamil separatists.
Standard & Poor's believes these are the principal sources of risk for the Sri Lankan economy, with each having the potential to exacerbate the country's fiscal woes and public-sector indebtedness and slow economic progress.
"The dynamics of Sri Lanka's political economy makes for an environment in which public-sector, economic, and fiscal reforms are difficult to accomplish and are prone to setbacks and reversals" said Standard & Poor's credit analyst Agost Benard.
Sri Lanka had also signed up Moody's Investor Services for a sovereign rating. Their rating classification was not announced, though markets were keenly expecting it.
Around million Sri Lankans live and work overseas and a recent World Bank report forecasted that the island’s remittances will top US$ 2.2 billion this year.
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