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Govt expects fruitful ‘speedy debt resolution’ during IMF-WB spring meetings

By: Staff Writer

April 16, Colombo (LNW): Sri Lanka expects fruitful engagements that will pave the way for unlocking the next tranche of essential IMF funding and a speedy debt resolution which will enhance economic stability, during the upcoming International Monetary Fund (IMF) and World Bank “Spring Meetings” 2024’ State Minister of Finance Shehan Semasinghe said.

Through dialogue, partnership, and concerted efforts, we are confident that we will achieve a brighter economic future for Sri Lanka”, Semasinghe said.

The 2024 IMF/World Bank Group Spring Meetings will take place from April 15 to April 19 in Washington, D.C. with the participation of policymakers, civil society, researchers and several other high-ranking officials.

Given the current favorable macro-economic head winds and economic resurgence, Sri Lanka’ is optimistic in finalising debt-restructuring talks in London with international creditors and entering into an agreement on the US$12 billion debt re-work proposal official sources said.

The Government’s macroeconomic policy reforms are starting to bear fruit. Commendable outcomes include rapid disinflation, robust reserve accumulation, and initial signs of economic growth, while preserving stability of the financial system, he added.

Sri Lanka will be bringing its debt service levels below 30 percent of revenue. Public finances have strengthened following substantial fiscal reforms, and it is critical that this reform momentum be continued.

The debt deals being negotiated with a group of bondholders steering committee have not been provided real debt cancellation or actual write offs of debt stock informed sources said.

The rescheduling agreement reached so far with bondholders by Sri Lankan authorities suggest a loan repayment moratorium for its US$ 12 billion bilateral debts until 2028.

A 30 percent haircut on dollar-denominated bonds, including international sovereign bonds among the major clauses included in the new debt restructure proposal.

Sri Lanka has submitted a new restructuring proposal to dollar bondholders through its adviser Lazard as the island nation seeks to complete revamping its defaulted debt, according to finance ministry official in London familiar with the negotiations with IMF.

The deals with bondholders may include contingency clauses to increase payments to them if/when the country reaches positive economic results

These contingency clauses ensure more benefits for the private creditors if the country does well, but they do not include reduced payments if there is a negative shock

The government plans to replace current US dollar denominated ISBs with new ones in the same currency.

The outstanding value of these ISBs amounts to $12.1 billion, a significant portion of the $22 billion external debt slated for restructuring.

A first round of talks in late March in London between the ad hoc group of international sovereign bondholders and the Government of Sri Lanka has ended without an outcome. and  discussions are set to continue around the International Monetary Fund spring meetings in Washington, DC, which started on April 15.

Sri Lanka has defaulted on its 12.5 billion-dollar bonds. The next steps on the debt restructuring are to conclude the negotiations with external commercial creditors and to implement agreements in principle with official creditors.

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