France together with Canada, Japan, Netherlands, Spain and the United Kingdom as long-standing and active members of the Paris Club recently requested the Southern District Court of New York to consider extending the five-month stay in support of the Government of Sri Lanka to safeguard the ongoing debt restructuring process.
Paris Club Secretary General Philippe Guyonnet Duperat, in a letter to Judge Denise L. Cote, strongly pointed out a judgment in favour of the plaintiff Hamilton Reserve Bank Ltd. (HRB) before the conclusion of the debt restructuring process would risk disrupting the negotiations by creating an incentive for creditors to hold out.
In consideration of Sri Lanka’s return to a sustainable economic and financial trajectory, France together with Canada, Japan, Netherlands, Spain, and United Kingdom, therefore, support Sri Lanka’s request to extend the motion to stay proceedings,” said the Secretary General.
He added that they were making this appael on the basis of continuing negotiations, which are critical to enduring the successful implementation of the International Monetary Fund-support program, including the smooth conclusion of its second review leading to the expected IMF Board approval at the end of June
According to Paris Club, since the beginning of this year, the Official Credit Committee (OCC) has been actively working to finalise the Memorandum of Understanding to be shared with the Sri Lankan authorities.
The OCC for Sri Lanka is composed of Paris Club members with exposure to Sri Lanka, as well as India and Hungary, who are not members of the Paris Club. The People’s Republic of China participated in the OCC as an observer.
“Additionally, the OCC has been informed that discussions are underway for a formal agreement between the Sri Lankan authorities and Exim Bank China, while negotiations with cooperative commercial creditors continue in good faith.
It is expected that the debt restructuring agreement with the OCC should be completed in the coming months, facilitating the advancement of negotiations with bondholders in view of ensuring comparability of treatment between official creditors and the private sector,” he added.
In a letter dated 31 August 2023, France and the United Kingdom expressed their support for Sri Lanka’s motion to stay. Since then, and supported by this decision to stay,
Sri Lanka has demonstrated significant progress in restructuring debt with relevant creditor groups. This began with the OCC, which deliberated on potential debt treatment scenarios during a dedicated meeting in September and established the main financial terms of debt treatment.
“Additionally, the OCC identified key non-financial clauses to be included in the forthcoming memorandum of understanding, such as the requirement for Sri Lanka to respect the long-standing principle of comparability of treatment.
