Sri Lanka has already called for managers to sell up to 2.0 billion US dollars in sovereign bonds in 2018. In the past Sri Lanka has sold up to 1.5 billion US dollars in bonds in a single offering.
The sovereign bond is expected to go market early this year, before the Fed raises rates again. Sri Lanka's last issued sovereign bond is also trading around 60 basis points narrower, and rating agencies have already given an outlook upgrade.
Sri Lanka was agnostic about the denominating currency, and was open to selling a Samurai or Panda bond after the dollar sovereign bond if the cost and tenor is right, Coomaraswamy said.
Sri Lanka is expected to pass a liability management law shortly which will allow the Treasury to sell more bonds than needed for debt repayment in a given year, to build a buffer to ride out a peak coming later.
A Samurai bond would allow Sri Lanka to tap into the Japanese bond market, while a Panda bond would allow Sri Lanka to enter the Chinese capital market.
Sri Lanka operates a 'de facto' soft-peg which generally depreciates uni-directionally against the US dollar generating high inflation. The currency collapses steeply whenever the central bank resists market interest rates by printing money, when the credit cycle turns strongly positive.
Due to operating a de facto dollar peg, there is also a currency risk in borrowings denominated in a currency other than the US dollar.
The Renminbi is also partially pegged to the US dollar, but it has shown a tendency to appreciate when the US Fed generates higher levels of inflation.
The Yen has weakened against the US dollar in recent years but is a floating rate with a very low interest rates.
Market analysts say it would be possible to sell a Samurai bond with a currency swap at a lower rate than a euro dollar bond of a similar maturity.