Sri Lanka aims to finalize debt-restructuring talks with international creditors by the second quarter of 2023, as it looks for early assurances from lenders to help unlock a $2.9 billion loan from the International Monetary Fund
President Ranil Wickremesinghe expressed confidence in the successful restructuring of external debt following talks with the Chinese Finance Minister.
The President said that the delegation headed by the State Minister of Finance, who is currently in Washington, held initial discussions on Saturday with the International Monetary Fund and the three main countries, China, India and Japan that have given loans to the country.
He said that the Government is giving priority to immediately solve the problem of the country’s bankruptcy and to ensure food security.
Sri Lanka has concluded formal talks recently as it seeks IMF board approval for the loan in December or January, local authorities said in a virtual presentation.
The most effective way to obtain the financing assurances quickly is the creation of an ad-hoc bilateral creditor coordination platform allowing the official bilateral creditors to give their financing assurances to the IMF collectively after having debated among themselves,” the authorities said.
The South Asian nation, which fell into its first ever default in May, has said it will ensure transparency and equal treatment among creditors including China, Japan and India.
But some of Sri Lanka’s bondholders see talks dragging on for months as they push for the inclusion of local debt and loans from non-state creditors in the restructuring.
Central bank Governor Nandalal Weerasinghe said the “perimeter” of Sri Lanka’s debt exercise is still being considered with the assistance of the debt advisers, according to people with knowledge of the matter who declined to be identified.
The issue of domestic debt is being looked at very carefully given the impact it may have on the stability of Sri Lanka’s banking sector and the overall macro fiscal framework, the people cited Weerasinghe, he added.
Sri Lanka’s debt stood at $101 billion last year, including guaranteed loans by state companies and central bank liabilities. Local currency debt accounted for 54 percent of the total, while bilateral debt is about 12 percent, according to Finance Ministry data.
Fitch Ratings earlier this month warned the nation is contending with a high risk of default on its local currency bonds.
President Ranil Wickremesinghe said the government was looking at debt talks including local bonds in the restructuring, while Weerasinghe had said he was confident Sri Lanka’s debt can be made sustainable without changing the domestic component.
Wickremesinghe is seeking bilateral creditor coordination to help accelerate efforts toward “debt sustainability and ensure comparability of treatment,” according to a Finance Ministry statement.
The president’s media unit confirmed that Sri Lanka’s three main bilateral creditors were among 23 Paris and non-Paris Club members that attended a forum for ambassadors recently
