Sri Lanka announced on Wednesday that China has approved a $1.5bn currency swap deal, that as per State Minister of Money & Capital Market Ajith Nivard Cabraal will allow the country to weather “present difficulties”. The island nation’s sovereign dollar bonds rose by 4-5 points on the announcement, with its 5.75% 2023s and 6.75% 2028s now trading at 64 and 60.5 cents on the dollar yielding 30% and 16.3% respectively.

Raza Agha, head of emerging markets credit strategy at Legal & General Investment Management commented on the news, “(The swap deal) buys time given FX reserves are at multi-year lows and there are still significant FX payments into year end. But the question remains – buy time for what? The need of the hour is an IMF program to anchor fiscal consolidation given government debt was projected at just shy 100% of GDP at the end of last year.”

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