(Adds analyst comments, details)
COLOMBO, Jan 21 (Reuters) - Sri Lanka will draw on its foreign currency reserves to settle a five-year $500 million sovereign bond maturing on Thursday, central bank officials said, a move analysts say would put pressure on interest rates and the rupee.
The officials said the authorities had opted against rolling over the issue.
“It’ll be paid from the reserves,” a central bank official told Reuters. Another official confirmed the move.
Foreign currency reserves fell by $474.33 million to $7.37 billion in the last two months of 2014, central bank data shows.
Analysts said the move would put the pressure on the rupee which is under downward pressure amid political uncertainty and lack of clarity over the government FX policy.
“Overall it’s negative,” said Shiran Fernando, an economist at Frontier research in Colombo. “The reserves coming down mean less room to defend the currency and it’ll put upward pressure on interest rates.” (Reporting by Shihar Aneez and Ranga Sirilal; Editing by Nick Macfie)
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