Sri Lanka bond debut helps counter war-torn image - CB chief

Ajith Nivard Cabraal

WASHINGTON, (Reuters) - Sri Lanka, laboring under negative publicity from a long civil war with separatist rebels, got a big psychological lift from a recent well-received bond issue, Colombo’s top banker said on Sunday.

Sri Lanka Central Bank Governor Ajith Nivard Cabraal said he traveled around the world on a road show in support of the $500 million Eurobond in order to “remove the smoke and show the actual picture” of a fast-growing, middle-income economy.

Sri Lanka drew orders of $1.25 billion for its first Eurobond, a five-year $500 million deal last week. Rated B-plus by Standard & Poor’s and ‘BB+’ by Fitch, the issue was priced at 8.25 percent.

“The fact that it was so well oversubscribed -- 3.2 times, in fact -- is an amazing result for Sri Lanka in the context of all the negative publicity,” he told Reuters.

An estimated 5,000 people have been killed since early last year in Sri Lanka amid near daily clashes, taking the death toll since the conflict between the government and separatist Tamil Tigers erupted in 1983 to around 70,000.

Despite dominating headlines, the area affected the fighting accounted for less than 3 percent of the Indian Ocean island state’s economy, Cabraal said.

“There has been progress that has often been unseen because of the concentration that the world has had on the conflict,” he said, citing a swift recovery from the 2004 Indian Ocean tsunami and growth in the face of soaring oil prices.

Sri Lanka drew investor interest on the strength of $4.5 billion package of infrastructure upgrades, rising garment, gem and tea exports, and trade with booming neighbor India, the governor said.

Sri Lanka’s annual economic growth in the second quarter of 2007 was 6.4 percent, up from a first quarter expansion of 6.1 percent, which was the slowest pace in two years.