Sri Lanka is expected to raise US$200 million by selling government bonds to overseas portfolio investors this year to help fund a sharp jump in the budget, the central bank chief said on January 22.
The central bank partially liberalised foreign currency investment rules in November to allow funds to buy up to five percent of Sri Lanka government bonds outstanding in the market in an effort to bring more liquidity into the market.

As at the end of 2006, Sri Lankas total outstanding debt had climbed to 1.15 trillion rupees or 44 percent of GDP, of which treasury bonds accounted for 901.3 billion rupees, according to central bank figures.

The benchmark fiveyear government bond currently yields 13.85 percent in Sri Lanka where inflation stood at 19.3 percent in December yearonyear and averaged 13.7 percent in 2006. Since liberalising debt investment rules, commercial overseas banks such as Citibank and Hong Kong and Shanghai Banking Corp have invested 230 million rupees (2.13 million dollars) in bonds.

Sri Lanka is stepping up efforts to raise revenue as the 35year old ethnic conflict, which has claimed over 60,000 lives, puts a strain on government coffers. Earlier, overseas portfolio investors were limited to shares in firms listed on the Colombo Stock Exchange and dollardenominated bonds issued by the government also known as Sri Lanka Development Bonds.