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Sri Lanka central bank converts provisional advances to bills, bills to bonds in DDR

Sri Lanka's central bank has converted interest-free advances provided to the government under an old law into Treasury bills and further transformed 2.4 trillion rupees in Treasury bills into longer-term bonds as part of a domestic debt restructuring effort. These conversions have resulted in the creation of 220 billion rupees in negotiable bills, contributing to the gross financing need (GFN) and adding to the deficit due to the interest earned. The provisional advances were initially introduced in 1950, functioning as loans in perpetuity, and were restructured to align with current financial practices. This move is expected to help manage forex shortages and reduce the interest burden on the budget by issuing bonds at lower rates compared to market rates for bills.

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