Sunday, June 4, 2023

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Tripartite debt restructure initiative gets underway amid ISB debt issue pending

By: Staff Writer

Colombo (LNW):India, Japan, and France on Thursday will announce the launch of the debt restructuring negotiations process on Sri Lanka while the creditor countries have been closely working toward a coordinated debt rearrangement process.

Sri Lanka’s debt obligations for India was US $ 1.652 billion, Japan $2.464 billion and France $411 million which were also included in the total amount of bilateral debt, finance ministry data shows.

The announcement of Finance Ministers of the three countries will be via a press conference in the side lines of the on-going World Bank-IMF Spring Meetings in Washington DC, USA.

Sri Lanka and the International Monetary Fund will also join the press briefing, the Japanese Ministry of Finance said.

President Ranil Wickremesinghe is expected to attend online while State Minister of Finance Shehan Semasinghe, who is currently in Washington, is also likely to attend

Sri Lanka’s sovereign lenders have yet to inform the Government how they will engage with the country to restructure its $7.1 billion of debt and whether they will form an official committee or engage in bilateral talks, the Central Bank Governor Nandalal Weerasinghe said.

The island nation aims to formally engage in debt negotiations with overseas creditors that include China, India and the Paris Club group of nations in May, after concluding a debt rework with holders of its domestic debt.

“It’s up to the creditors to decide. We are happy if there is one platform, as it would be easier to discuss and share information,”he said. .

“Whether they are coming together or on a separate bilateral basis, we will have comparable debt treatment,” Weerasinghe said on the sidelines of the World Bank and International Monetary Fund spring meetings in Washington.

As per Finance Ministry sources, Sri Lanka’s ISBs account for a significant 66% share or $ 20.3 billion of commercial FX denominated public debt, excluding ECA-backed debt and SOEs’ payables and including arrears, as at end-2022. Outstanding amount to bonded private creditors was $ 14.5 billion.

ISBs holders have organised around two committees. ISBs international bondholders have formed an ad-hoc creditor committee and this group is said to represent more than 55% of ISBs non-domestic holdings. The group is advised by Rothschild and White and Case.

Separately a consortium of local private banks holding ISBs has formed another group which has reported holdings in around $ 1.5 billion across all series of ISBs (around 12% of outstanding ISBs). The group is advised by Baker and Mckenzie.

As per Government’s plans on external debt restructuring, next steps with private creditors included engaging on a technical basis with bondholder committees’ advisors and other private creditors to ensure further sharing of information and data, under NDAs.

It will conduct the required restructuring discussion channels with all private creditors and their advisors; reach agreements with private creditors and their advisors that are (i) compliant with the IMF DSA targets and (ii) comparable across different creditor categories and ensure the legal implementation of the agreements reached with all parties.

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