Central bank of Sri Lanka said it will dig into its foreign exchange reserves to part repay $1 billion of bonds maturing late in July month, and seeking to allay investors’ concern about a possible default. Governor Weligamage Don Lakshman informed about some possible inflows to the government coming in July, which could also be used toward the debt obligation. The nation’s reserves stood at about $4 billion, according to a central bank statement last month.S

The yield on the 7.55 per cent 2030 dollar bond fell by 16 basis points to 16.27 per cent, while that on the 5.75 per cent 2023 dollar bond fell 28 basis points to 28.51 per cent. Both notes are headed for the biggest jump in about a week.

The monetary authority said “Adequate financing strategies have been lined up to maintain reserves at sufficient levels and to meet all maturing debt servicing obligations of the government on time.” The monetary authority has kept interest rates unchanged to support the recovery of the economy.

While rates were maintained despite inflation heading up toward the upper end of its 4-6 per cent target band, the central bank said it stands ready to take action to keep price growth in the midst of single digits. Reuters has reported that Sri Lanka’s central bank left its key policy rates steady on Thursday, as the island nation’s economic recovery weakens on account of the disruptions caused by the third wave of the COVID-19 pandemic.

“The Central Bank will continue to monitor domestic and global macroeconomic and financial market developments and stand ready to take appropriate measures, as and when necessary,” CBSL said