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COLOMBO (Reuters) – Sri Lanka has used part of the proceeds of its $500 million sovereign bond for debt repayment but will reissue securities as and when needed for infrastructure projects, government officials said on Tuesday.

The government had used 20 billion Sri Lankan rupees ($181.1 million) out of its $500 million debut sovereign bond to settle outstanding government debts, which had been borrowed for the same infrastructure projects that the dollar bond is to fund.

“Even before we got the bond, we had already paid 20 billion rupees for those development projects through Treasury Bills. So, there is no issue in settling those debts from the bond money,” Minster of State Revenue and Finance Ranjith Siyambalapitiya said.

“If the government needs the money next week for developments projects we will issue Treasury Bills and find money quickly,” he added.
The Finance Ministry said it had used some of the remaining funds from the bond issue to settle other Treasury Bills, which were not sold to fund infrastructure projects, to reduce its Treasury Bill stock. This is to gain the advantage of the interest rate differential,” they said.

The main opposition United National Party (UNP) said the government had used 35 billion rupees to settle its day-to-day debts and not to fund capital spending.

“Government has utilised 13 billion rupees to settle the Central Bank debt and 22 billion rupees to settle state bank debt,” UNP Member of Parliament and former Trade Minister Ravi Karunanayaka said.

Sri Lanka sold a five-year $500 million worth first ever sovereign bond at a coupon rate of 8.25% last month to fund ports, highways and power plant projects.

The issue was over subscribed over three times, despite the main opposition writing to all three lead managers, threatening that it would not honour repayment in a future UNP government.
It also threatened to cancel the banking licence of HSBC, the only locally operating banks in Sri Lanka out of the three lead managers.