Time to get serious: Sri Lanka's Coomaraswamy wants to give targets real teeth

Indrajit Coomaraswamy wants to institutionalise Sri Lanka’s macro-economic framework by stiffening up the country’s Fiscal Management Responsibility Act.

  • By Elliot Wilson, GlobalMarkets
  • 12 Oct 2017
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By Jackie Horne and Elliot Wilson


Coomaraswamy 250
Coomaraswamy: building reserves
Sri Lanka has the right strategic plans in place to take its economy to the next level, but the challenge is whether they can be executed effectively, the country’s central bank governor Indrajit Coomaraswamy told GlobalMarkets yesterday.
“That’s our challenge and the jury’s still out,” he said. “But our economy has enough assets to make that leap forward if we can achieve it.”
Coomaraswamy said Sri Lanka had historically never got its macro-economic framework right either: a problem he is determined to fix. 
The country is one year into a three-year Extended Fund Facility (EFF) from the International Monetary Fund (IMF), having hit a balance of payments crisis as a result of the previous government’s heavy reliance on Chinese funding for infrastructure projects that did not generate an economic return. 
To keep future officials in check, the central bank wants to institutionalise Sri Lanka’s macro-economic framework by adding “some teeth” to the country’s Fiscal Management Responsibility Act. 
“The act has budget deficit and debt-to-GDP targets, but no one takes them seriously,” Coomaraswamy said. “We want it to stipulate specific reasons why a target might be exceeded and a clear plan to bring it back again.”
The governor said politicians were not keen on the idea, but the central bank had the prime minister’s support and was, therefore, confident parliament would pass it. 
The IMF programme calls for a budget deficit of 3.5% by 2020. Coomaraswamy said the 2017 figure was likely to come in around the 5.2% level, having slipped slightly because of droughts and flooding earlier this year.
But he is confident of meeting the 2020 target given appreciable progress the government has made improving tax collection rates from 11% to a projected 14% of GDP this year. He expects this to improve further to 16.5% by 2020 after parliament passes a new income tax bill. 
Coomaraswamy also said Sri Lanka had done a good job rebuilding its foreign exchange reserves to $7.2bn, or 4.5 months of import coverage. And he added that the figure did not yet include money the government will receive from selling a lease for its Hambantota port to China. 
He argued that if Sri Lanka can maintain its current macroeconomic path, its financing rates should not be affected by rising US interest rates. The country does not have any international bonds maturing in 2018 and the central bank intends to use the breathing space to improve its debt maturity profile.
“Next year, we won’t just finance the budget deficit in the international bond markets, but also engage in a liability management exercise to lengthen our yield curve,” he concluded. “We’re currently removing our borrowing cap so we can engage in buybacks and refinancing.”



  • By Elliot Wilson, GlobalMarkets
  • 12 Oct 2017

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
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1 Citi 417,761.51 1606 9.02%
2 JPMorgan 380,362.89 1737 8.21%
3 Bank of America Merrill Lynch 364,928.71 1322 7.88%
4 Goldman Sachs 269,252.76 932 5.81%
5 Barclays 267,252.43 1082 5.77%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
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1 HSBC 45,449.36 196 6.56%
2 BNP Paribas 38,734.80 217 5.59%
3 Deutsche Bank 37,615.10 139 5.43%
4 JPMorgan 34,724.19 118 5.01%
5 Bank of America Merrill Lynch 33,835.53 112 4.88%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
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1 JPMorgan 22,475.46 105 8.65%
2 Morgan Stanley 19,057.00 101 7.34%
3 Citi 17,812.08 111 6.86%
4 UBS 17,693.89 71 6.81%
5 Goldman Sachs 17,333.10 99 6.67%