S Lanka plans to raise more money from overseas investors

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COLOMBO, Dec 2 (AFP): Sri Lanka plans to raise more money from overseas investors, officials said despite the International Monetary Fund warning that the island could be heading for a foreign debt crisis.
Sri Lanka's Central Bank said today it had lifted the ceiling on foreign holdings of government rupee bonds, allowing overseas investors to buy into more than 500 million dollars worth of new debt.
Foreigners who were earlier allowed to buy up to five per cent of government bonds, had picked up 460 million dollars worth of debt paper, the bank said, adding the move would further relax capital account transactions.
"This measure will enhance the development of the capital market by broadening the investor base," the Central Bank said.
The announcement came a day after the island's powerful treasury secretary Punchi Banda Jayasundera disclosed plans to raise up to 300 million dollars in sovereign bonds carrying maturities up to 10 years.
The government hopes to raise the money by next April, after its maiden 500 million dollar bond issue was three times oversubscribed in October, Jayasundera said.
"We are also hoping to reduce the interest cost of some of our foreign borrowings," Jayasundera said despite the IMF warning Sri Lanka to change its recent habit of borrowing commercial dollars to bridge high budget deficits.
The island's budget deficit was expected to hit is 7.8 per cent of GDP this year, the Fund said.