By: Staff Writer
Colombo (LNW): Japan has agreed to promote coordinated debt restructuring program for Sri Lanka welcoming the government’s to begin discussions with the bilateral creditors on debt restructuring of US$ 7.1 billion out of the total $25.9 billion owed to external creditors.
Sri Lanka is now holding debt restructuring talks with Paris Club members together with India, while discussing with China separately.
Three baseline restructuring scenarios” with six-year maturity extension for all of them and nominal haircuts ranging from 15 per cent to 30 per cent, with higher coupons corresponding to lower haircuts have already been proposed reliable official sources said.
Each of the three baseline scenarios also implies roughly equal net present value relief of 23-28 per cent at the IMF’s preferred 5 per cent discount rate.
Sri Lanka indebted $7.1 billion to bilateral creditors, according to official government data, with $3 billion owed to China, $2.4 billion to the Paris Club and $1.6 billion to India.
The government will present a comprehensive plan for treating foreign as well as local debt to creditors this month (middle of May) postponing the earlier date late on Tuesday (April 25),a senior finance ministry official involved in IMF negotiations said.
“Sri Lanka’s total debt is $ 83.6 billion. Foreign debt amounts to $ 41.5 billion. Domestic debt amounts to $ 42 billion.
It is expected the restructuring negotiations delay and extend till December against the government deadline of completing it by September, he claimed.
Under the IMF staff baseline scenario, $17 billion in debt service reduction is required, including the arrears accumulated in 2022.
Finance Minister of Japan Shunichi Suzuki acknowledged the higher risks faced by low- and middle-income nations concerning debt vulnerabilities amid the COVID-19 pandemic and Russia’s invasion of Ukraine.
He welcomed the recent launch of a coordinated debt restructuring program for the bilateral creditors of crisis-hit Sri Lanka, with Japan, India and France announcing the start of the process in April. China is also a major creditor.
“It is essential to improve debt data transparency and accuracy to prevent future debt crises,” the Minister added.
The government will present a comprehensive plan for treating foreign as well as local debt to creditors next Month (middle of May) postponing the earlier date late on Tuesday (April 25),a senior finance ministry official involved in IMF negotiations said.
The delay in the releasing of the plan shows the difficulty the Sri Lanka authority face in balancing the demands of its bondholders, he said adding that this will be raising the risks associated with the IMF’s $3 billion Extended Fund Facility (EFF) program.
“Sri Lanka’s total debt is $ 83.6 billion. Foreign debt amounts to $ 41.5 billion. Domestic debt amounts to $ 42 billion.
It is expected the restructuring negotiations delay and extend till December against the government deadline of completing it by September, he claimed.
Under the IMF staff baseline scenario, $17 billion in debt service reduction is required, including the arrears accumulated in 2022.
Foreign creditors now demand to include domestic debt in the restructuring, which some Sri Lankan banks opposing but the government seeks to avoid talks that include pre-conditions.
