The International Finance Corporation ( IFC ) has issued its first-ever rupee-denominated bond in Sri Lanka in a major step towards supporting the private sector in the country amid the challenging economic environment.
Called the Serendib bond, the US$5 million equivalent offering, announced on October 13, is a milestone in efforts to ensure that the private sector has access to long-term offshore funding in local currency – while hedging foreign exchange risk – at a critical time.
The involvement of a triple A-rated issuer such as IFC in introducing Sri Lankan rupee to the international capital markets will help create a benchmark for future rupee issuance, and provide offshore investors the ability to gain exposure to the currency.
Commenting on the offering, IFC regional director for South Asia Hector Gomez Ang says the first rupee-denominated bond by IFC in Sri Lanka comes at a critical time – in the midst of the Covid-19 pandemic – and will be significant in contributing to the development of a more resilient, efficient and inclusive financial sector. “With this landmark transaction, we aim to encourage private sector to invest in the future of the country, paving the way for job creation and inclusive and sustainable growth,” he adds.
The bond proceeds are earmarked to finance Sunshine Consumer Lanka, a subsidiary of Sunshine Holdings PLC. The investment will support the domestic confectionary supply chain and help strengthen the overall competitiveness of the country's fast-moving consumer goods ( FMCG ) sector.
Sunshine Holdings group managing director Vish Govindasamy says the partnership with IFC will allow the company to grow further through diversification of its businesses and expand its presence in the consumer goods sector. He says the bond will protect their business from exchange rate volatility as well as from any increase in interest rates, while giving them access to foreign credit markets to grow their business.
The inaugural rupee-denominated bond in Sri Lanka is a classic example of IFC’s strategy of developing the bond market and making international financing available.
In November 2019, IFC issued the first-ever taka-denominated Bangla bond on the London Stock Exchange – raising the international profile of the Bangladeshi currency.
IFC, which has issued bonds in about 80 local emerging market currencies, has been an important issuer of capital market instruments in domestic currencies. It is an issuer of green and other labeled bonds, and has supported clients in accessing the capital markets as an anchor investor in new issuances that help to bridge the financing gap in emerging markets.