• Fri. May 17th, 2024

Sri Lanka bondholders ready for debt restructuring negotiations consistent with the IMF Programme

 A group of Sri Lanka’s sovereign USD-denominated Bondholders of is ready to hold debt restructuring negotiations with Sri Lankan authorities consistent with the International Monetary Fund’s (IMF) program.

“The Bondholder Group hereby confirms it is prepared to engage, through its Steering Committee, with the Sri Lankan authorities in restructuring negotiations consistent with the parameters of an IMF Programme and the targets specified therein (the “IMF Programme Targets“), which the Bondholder Group understands to be the targets identified in the India Letter; it being recognized that these negotiations will necessarily be further informed by the receipt of the forthcoming DSA,” the Group’s legal advisor informed IMF in a letter.

Global investment companies Amundi Asset Management, BlackRock, HBK Capital Management, Morgan Stanley Investment Management and T. Rowe Price Associates Inc. are among the group of around 30 creditors.

However, the Group stressed that the following conditions need to be satisfied to reach a final agreement.

  1. The central government’s domestic debt – defined as debt governed by local law – is reorganized in a manner that both ensures debt sustainability and safeguards financial stability. Assuming that annual gross financing needs should not exceed 13% of GDP in the period between 2027 and 2032, whilst allowing for central government annual foreign currency debt service to reach 4.5% of GDP in every year between 2027 and 2032, domestic gross financing should therefore be limited at 8.5% of GDP for the period 2027-2032.
  2. While we recognize that the determination of the economic assumptions underpinning the IMF Programme Targets is ultimately the responsibility of the IMF and that the overall design of the IMF Programme is one that is negotiated between the IMF and Sri Lanka, it is nevertheless important that the Bondholder Group has the opportunity to express its views on both the economic assumptions underpinning these IMF Programme Targets and the adequacy and feasibility of the adjustment efforts contemplated under the IMF Programme. When considering any restructuring proposal that is made to the Bondholder Group, it is the Bondholder Group’s intention to take into consideration the extent to which the economic assumptions and the adjustment efforts are consistent with these views.
  3. Recognizing the important commitments made by India in the India Letter, the Sri Lankan authorities will apply the principle of comparable treatment in respect of the debt relief requested and obtained from all their remaining official bilateral creditors.

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