The Securities and Exchange Commission (SEC) has stepped in to raise funds for government’s development activities via the Colombo stock market.
Making a new and innovative suggestion for the local bond market, SEC Director-General Chinthaka Mendis called on the government to seek funding for its development projects at the Colombo Stock Exchange (CSE), saying that the country should no longer depend on foreign loans.
"When it comes to economic development, the country can’t any longer depend on foreign loans. Therefore, the stock market is the place where the state can raise funds for ambitious development projects.
So, don’t look elsewhere. This is the place, where CSE can fund the development projects on behalf of the government,” Mendis said whilst addressing a special market opening ceremony which was organised to mark the digitalization of the Sri Lankan stock market.
However, financial analysts say that CSE‘s entry into government securities trading will change the monetary regulatory system of the country and it will be a monetary policy change.
The SEC's entry into the government bond market to raise funds for development activities in any other manner will overhaul the entire current system of bond trading in the island nation, analysts pointed out.
The bond market is where investors go to trade (buy and sell) debt securities, prominently bonds, which may be issued by corporations or governments.
It is also known as the debt or the credit market. Securities sold on the bond market are all various forms of debt.
By buying a bond, credit, or debt security, you are lending money for a set period and charging interest—the same way a bank does to its debtors, they explained.
The bond market provides investors with a steady, albeit nominal, source of regular income. In some cases, such as treasury bonds issued by the government, investors receive bi-annual interest payments. Many investors choose to hold bonds in their portfolios as a way to save for retirement, for their children's education, or other long-term needs.