Central Bank Governor Mr. Ajith Nivard Cabraal speaks of the positive impact on the economy of the oversubscribed bond issue

Picture shows from left to right - Mr. K.G.D.D Dheerasinghe, Alternative Executive Director IMF,
Mr. Ajith Nivard Cabraal, Governor Central Bank, Mr. W.A. Wijewardena, Deputy Governor Central Bank and
Dr. P.N. Weerasinghe, Director Economic Research Department, Central Bank.

Following a triumphant international road show of meeting with international investors in Singapore, Hong Kong, London, New York, Boston and Los Angeles, which assured $500 million from the international bond market, the Governor of the Sri Lanka Central Bank, Mr. Ajith Nivard Cabraal, is currently in Washington DC, to attend the Annual sessions of the World Bank and the IMF.

In an exclusive interview at the Sri Lanka Embassy in Washington DC, Mr. Cabraal said that the response of the international investor community to Sri Lanka’s economic story was overwhelming. "In fact, the international investors were prepared to commit investments over $1.6 billion," he said, and highlighted that Sri Lanka’s debut international bond was oversubscribed 3.2 times. Mr. Cabraal said, "It can be termed a huge success." Sri Lanka accepted $500 million of the offered $1.6 billion. During the course of the road show, Mr. Cabraal and his team had met nearly 50 international investors on one-on-one meetings and at least 30 investors each during four luncheon meetings.

A meeting organized on Friday by the CitiGroup in Washington DC facilitated Mr. Cabraal to brief a group of investors on the state of Sri Lanka’s economy and the investment opportunities available.

The bond issue was jointly led by JP Morgan, Hong Kong and Shanghai Banking Corporation and Barclays Capital, on behalf of the Sri Lanka government.

During the initial two days of the breaking news, the impact of this success story on Sri Lanka’s economy has been sensational, marked specially by a significant reduction in interest rates in the Treasury Bill and Treasury Bond market and a discernible appreciation of the Sri Lanka rupee against the US dollar. The Treasury Bill interest rate has come down by 22 basis points and the exchange rate has appreciated by about 60 cents during the past two days. The stock market went up by nearly 1% yesterday. The treasury bill interest savings the government has got has already exceeded the first entirety of the interest payment to be made on the bond issue. Economic analysts in Colombo said, “It is likely that there will be a very favorable impact on the cost of living and economic activity in general.” The confidence of the international investors has also buoyed up the Sri Lanka stock exchange and indices appreciated by nearly 1% in a very brisk day of trading. The mood appears to be one of perceptible international confidence in the resilience of the Sri Lanka economy and a significant commitment toward the massive infrastructure projects in the country.

Mr. Cabraal says that the government’s focus is toward greater expansion of the economy and he predicts that Sri Lanka will be able to achieve a growth target of 7.5% for 2008 and very effectively control the fiscal deficit.

Mr. Cabraal said that the oversubscription of Sri Lanka’s debut bond issue clearly indicates the confidence that experienced international investors have in Sri Lanka and their belief in the country’s ability to spur economic growth to great heights and to maintain the momentum to achieving even greater progress, while maintaining macro economic fundamentals at satisfactory levels.

Associated with Mr. Nivard Cabraal at these meetings were Mr. K.G.D.D Dheerasinghe, Alternative Executive Director IMF, Mr. W.A. Wijewardena, Deputy Governor Central Bank and Dr. P.N. Weerasinghe, Director Economic Research Department, Central Bank.

Embassy of Sri Lanka
Washington DC

19 October 2007


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