Monday, June 17, 2024

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SL to negotiate with Paris Club, other lenders on debt restructuring

Sri Lanka government will seek international sovereign bond payment extensions from Paris Club lenders and other creditors following its decision to work out a debt restructuring plan with the International Monetary Fund (IMF), official sources said.

The round table negotiations with sovereign bond holders will be carried out in New York or France in accordance with the convenience of those creditors, he disclosed. Ten per cent of Sri Lanka’s creditors are members of the Paris Club, with Japan being the main bilateral creditor for Sri Lanka.

Negotiations with bond holders in China and India, who are not Paris Club partners, have to be conducted outside the Paris Club.

No final decision has been taken on Sri Lankan officials who will be participating at these negotiations.

Sri Lanka is also exploring the possibility of working out a debt financing package to secure foreign exchange inflows into the country including remittances, a senior Finance Ministry official said.

One of the other alternate strategies is to raise funds from investors to deal with the upcoming debt payments, he added. All these suggestions included Sri Lanka’s plan of bridging finance proposals will be presented to the IMF during discussions to seek their assistance.

He disclosed that official talks were held with bankers from Rothschild & Co. and Lazard on these financing proposals including the debt financing package.

Sri Lanka will hire a global law firm to provide technical assistance on debt restructuring ahead of talks with the IMF on the country’s economic crisis, Cabinet spokesman Minister Ramesh Pathirana said.

In a movement of unity, 12 opposition MPs have called on the Sri Lankan government to negotiate a postponement and restructuring of its $25 billion debt repayments due between now and 2026.

Issuing a joint statement recently they noted that the “only way forward for Sri Lanka is to immediately initiate a multi-step process towards an orderly negotiated postponement and restructure of repayment of its sovereign debt”.

Finance Minister Basil Rajapaksa will be visiting Washington next month to present Sri Lanka’s plan of bridging finance proposals to senior IMF officials, a senior Finance Ministry official revealed.

He will be accompanied by the Treasury Secretary, Central Bank Governor, two top officials each from the Finance Ministry and the Central Bank for these IMF spring meetings, he said.

The government will seek IMF assistance for debt restructuring, foreign exchange crisis, revenue generation and reforming state-owned enterprises, according to Sri Lanka bridging finance plan.

According to former Central Bank Deputy Governor W.A. Wijewardena to rescue Sri Lanka from the present acute foreign exchange crisis, there is no alternative other than getting a longer-term loan of at least $4 billion from the IMF.

It is estimated a total of $5 billion will be need to service debt obligations (principal + interest) and other commitments in 2022, Finance Ministry data showed.

The debt restructuring suggestion was discussed widely in local media and various other public forums during the past one and half years. But it went unheeded up to now.

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