Sri Lanka nears in Debt Restructuring deal with bilateral creditors
By: Staff Writer
June 06, Colombo (LNW): Sri Lanka and an ad hoc group of creditors are in progressive talks over a debt restructuring deal with bilateral lenders official source said.
Sri Lanka may still face external debt exceeding 70% of its GDP unless it implements debt management laws.
The government underscores the critical importance of reforms for resuming growth in Sri Lanka. Key reforms such as the enactment of the Public Financial Management Act and a debt management law, expected in 2024, aim to strengthen fiscal discipline and mitigate medium-term refinancing risks.
The government and members of the official creditor committee, which includes India, Hungary and the Paris Club, are exchanging draft versions of the accord, or memorandum of understanding, several top officials who wished to remain anonymous said.
The documents are needed to finalize an agreement reached in November between the South Asian nation and the official creditor committee and hash out the few remaining issues before a deal is settled, one of the people said.
Sri Lanka needs to reach deals with bilateral lenders and bondholders to keep receiving disbursements under its $3 billion bailout from the International Monetary Fund. The IMF will evaluate the deals to ensure they provide enough relief to the island nation that it can meet its debt sustainability parameters.
The country owes $10.6 billion to bilateral creditors, according to government data, with China representing over 40% of that debt. It also needs to restructure $12 billion in debt with overseas private creditors.
Because it has middle-income status, the country is not part of the so-called Group of 20 Common Framework debt initiative, so talks with Chinese official creditors are conducted separately. The people declined to provide any updates on the negotiations between Sri Lanka and China, citing the fact that those talks are separate.
Sri Lanka’s central bank governor and the secretary of the treasury didn’t respond to queries from Bloomberg. Cabinet approval was sought for a debt restructuring matter, Cabinet spokesman Bandula Gunawardana said Tuesday, without elaborating when questioned about whether bilateral creditor debt agreements were discussed.
