3

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Parliament Responsible for setting annual borrowing limit as part of annual Appropriation Act

Central Bank Government Treasury

Public Debt Dept. (PDD) External Resources Dept. (ExRD)
• Mobilisation and management of external
• Mobilisation of funds from domestic sources and
concessionary funds
external non–concessionary commercial sources for
• Coordination with donors
government budget
• Maintenance of external debt database
• Servicing of public debt
Treasury Operations Dept. (TOD)
• Issue government securities through auctions and on
• Treasury cash flow management
tap basis
• Provision of funds for debt service
• Maintenance of domestic debt database
Fiscal Policy Dept. (FPD)
• Maintenance of CDS
Advise on:
• Regulate and supervise the Primary Dealer System
• Fixing of total borrowing limits
(PDS)
• Loan composition
• Developing the G-Sec. market
• External commercial borrowings
• Dissemination of information
State Accounts Dept. (SAD)
Economic Research Dept. (ERD)
• Accounting for fiscal operations.
• Analysis of debt statistics and conduct of debt
sustainability analyses

Other Players in the Government  Debt Market
Primary Dealers- Intermediaries ( Raise funds at lowest cost and act as market
makers)
Licensed Commercial Banks and other financial institutions - Investors
Insurance Companies- Institutional investors
EPF/ETF - Institutional investors
Corporate- Investors – private sectors investors
Other Groups including foreign and local individuals
 DOMESTIC  DEBT
INSTRUMENTS

Treasury Bills
Treasury Bonds
Rupee Loans
Sri Lanka Development Bonds
86 % Tradable securities such
as T-Bills T-Bonds and SLDBs

SLDBs and FCBUs are foreign

currency denominated

Non-bank sector owned 70% of

domestic debt

EPF is the main investor in

government securities

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•Short term instrument issued by the Central Bank on behalf
of the Government of Sri Lanka to raise short term funds
for the Government.

•Issue under the Local Treasury Bill Ordinance (LTBO) of

1923 as amended in 1953,1992,1995 and 2005

•Opened for foreign investors in May, 2008 and 10% of the

outstanding stock is available for foreign investors.

•This is a money market instrument

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9
•Medium to Long term debt instrument issued by
the Central Bank on behalf of the Government of
Sri Lanka to raise Medium to long term funds for
the Government.

•First issued in 1997

•Issue under the Registered Stock and Securities

Ordinance (RSSO) of 1937 as amended in 1949, 1983,
1985, 1995, 2004

•Capital market instrument

•Opened for foreigners in November, 2006 and 10% of

the outstanding stock is available for foreign investors
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12
Primary Market Central Bank Primary dealer The public
•In the primary Holds
Bids on behalf Investors
auctions to
market, investors of clients and send their
sell
can forward their his own bids
Government
bids through behalf at through
Securities
Primary Dealers. Primary primary Companies
Auctions. dealers.
Primary Dealers
perform an
intermediary role.
•Minimum bidding
size is Rs. 5 mn
and thereafter
Banks
multiples of Rs. 1 Foreign
mn Primary Investors
Dealer
Central Bank

Household
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Primary Issue Details (a)
Rs. billion.
2009
Instrument 2006 2007 2008
(Jan-Aug)

Treasury bills 628 817 780 581

Treasury bonds 310 401 489 569

(a) Amounts in face value. Source: Central Bank of Sri Lanka

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Secondary  Market
Different types of transactions take place amongst the
In the Secondary market, market participants, subsequent to the primary market
players enter into different activities.
types of transactions.
However, any secondary
market transaction has to be Corporates
endorsed either by a primary
dealer or a commercial bank .
Generally, there are three Primary
types of secondary market Dealer
transactions. They are;
Banks
• Outright Purchase Foreign
Two types of Investors
• Outright Sales
Investors
• Repurchase Agreements •Buy and hold Primary
(Repo) until maturity Dealer
• Reverse Repurchase •For trading
Agreement (RR) purposes Households

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 Secondary Market Transactions a/ (amounts in Rs. Bn)

T-bill T-bill T-bond T-bond

Year Total
Outright Repo Outright Repo

PDs Total PDs Total PDs Total PDs Total PDs Total

2007 809 1,268 1,828 4,545 392 1,124 1,773 5371 4,802 12,308

17,57
2008 887 1,466 1,975 6,100 469 1,600 2,336 8,410 5,667
5

a/ Secondary Market Transactions done by Primary Dealers (PDs) and all secondary
market transactions

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• 1923 – Introduction of Treasury Bills for the first time.
• 1941 – Commencement of Treasury bill issue under 
Parliamentary approval
• 1981 ‐ A secondary market window was opened for Treasury 
Bills by the Central Bank.  
• 1986 ‐ Weekly Treasury Bill auctions commenced
• 1992 ‐ Primary Dealers were appointed.
• 1993 ‐ Repo window for Treasury Bills was introduced by the 
CBSL.
 Key Features of the new debt management strategy as envisaged in the Road Map
I. Mitigate potential risk by implementing debt consolidation programme
II. Reduce the fragmentation in the bond market.
III. Introduce Benchmark bond series and develop a benchmark yield curve.
IV. Further strengthening PD system through diversification of PD activities.
V. Increased competition in the Government Securities market by broadening
intermediary base
VI. Extension of duration of the debt stock and develop long term yield curve
through debt consolidation.
VII. Broadening investor base by enhancing foreign participation in local
Treasury Bond market and vigorous local investor awareness
programmes.
VIII. Access international capital market.
IX. Alternative financing for budget financing- i.e.Public private partnership.24