By: Staff Writer
March 03, Colombo (LNW): Sri Lanka expects to implement a debt restructuring framework within the first six months of 2024 seeking a five-month hold on a lawsuit filed by a bondholder over the country’s historic debt default, telling a New York federal judge that it wants more time to negotiate with private creditors.
The country was sued in July 2022 by Hamilton Reserve Bank Ltd., which sought full payment on more than $250 million of Sri Lanka’s dollar bond that was due that month.
The bank says it holds more than 25% of the bonds, which would likely enable it to block any modification of the notes.
On Friday, Sri Lanka sought an extension of a delay of the lawsuit that was granted in November. Hamilton Reserve opposed the new request, saying that the country has kept the bank “in the dark” about the negotiations despite repeated requests for information.
The island nation is prioritizing restructuring obligations to its private creditors as it seeks to fast-track a debt overhaul and exit a sovereign default, the foreign minister told Bloomberg last month.
The case is Hamilton Reserve Bank v. Sri Lanka, 22-cv-5199, US District Court, Southern District of New York (Manhattan).
The new administration which took over in mid-2022 amid a debilitating financial crisis caused by a severe shortage of foreign exchange was aiming gross domestic product (GDP) growth of 3% this year.
Sri Lanka’s economy is estimated by the World Bank to have contracted by 3.8% last year but is expected to grow by 1.7% in 2024. Sri Lanka’s central bank has projected a more optimistic growth of 3% for this year.
The South Asian island nation defaulted on its overseas debt in May 2022 after a severe shortage of foreign exchange reserves triggered the worst financial crisis since independence from Britain in 1948.
Sri Lanka has since made progress on about $11 billion of bilateral debt restructuring and hopes to have agreements in place with all key creditors, including bondholders, by May at the latest, Foreign Minister Ali Sabry said. .
The country finalized a $2.9 billion bailout from the International Monetary Fund IMF in March last year, which helped temper sky-rocketing inflation, improved state revenue and boosted foreign exchange reserves.
