Sri Lanka plans to issue 500-million-dollar bond

Sri Lanka plans to issue a new international bond this year with a 10-year maturity to help defray mammoth post-war rebuilding expenses, the central bank said Saturday.

"We need about 2.7 billion dollars for the next three years to build new roads, utility services, hospitals and schools to get the northern economy up to speed," central bank governor, Nivard Cabraal said.

The northern province, which was the stronghold of the separatist Tamil Tiger guerrillas, is picking up the pieces after troops last May crushed the revolt and ended decades of bloodshed.

The province accounts for just 2.9 percent of the island's 40-billion-dollar economy.

Cabraal said the bond will be issued after the next budget, expected in April.

"We are looking at May or just after that," he said. "We think Sri Lanka has now matured and gained the confidence of investors for a longer tenure instrument."

Sri Lanka's 2010 budget has been delayed due to presidential polls in January which were won by incumbent president Mahinda Rajapakse.

The island has been gripped by tension since authorities arrested ex-army chief and defeated presidential candidate Sarath Fonseka earlier in the week.

Parliamentary elections are due on April 08.

Sri Lanka issued a 500-million-dollar bond in 2007 and in 2009.

The bonds are trading well above their issue price as investors hunt for high yields in emerging markets and seek to diversify from low-yielding western markets.

Cabraal forecast economic growth of at least six percent this year for the island nation, up from 3.5 percent in 2009.

"We are looking at six percent plus growth. Areas like tourism, transportation and ports, agriculture and fisheries are picking up," he said.

© AFP