Home » Sri Lanka to discuss the repayment of emergency credits from India

Sri Lanka to discuss the repayment of emergency credits from India


Sri Lanka is to discuss the repayment of emergency credits from India separately from other defaulted debt, Central Bank Governor Nandalal Weerasinghe said.

The Asian Clearing Union and other Indian credits from India given in 2022 have been excluded from the perimeter for the debt restructuring process, he revealed.

Central banks swaps from “and any short term emergency facilities from anywhere and anything that was disbursed after the debt suspension” in April 2022 are also excluded.

“Those will have to be discussed separately. There is an understanding with creditors, especially with India about their liabilities between creditors that once we finalize the debt restructuring terms we will discuss separately, how we can settle.”

Sri Lanka owes around US$1.9 billion on ACU credits given by India according to data released to creditors.

India has given around 3.9 billion US dollars through credit lines, swaps and ACU deferrals

Any domestic debt restructuring will be part of a negotiation process with creditors, which will take place after a program with the International Monetary Fund is in place, Central Bank Governor Weerasinghe said.

First financial assurances from bi-lateral creditors have to be received to qualify for the IMF program.“Then only we start discussions with private creditors, he added.

Sri Lanka was already engaged with a private creditor but detailed discussions will start after the IMF program is in place.

The discussions will involve ‘what is demanded from the other side and how they can contribute’ and ‘how we can contribute’.As a creditor party it was not right to comment, he said.

Sri Lanka’s sovereign bond holders however will demand a domestic debt restructuring, according to reports.

Sri Lanka is expecting to conclude debt restructuring in about six months, Governor Weerasinghe said.

Sri Lanka authorities have said a domestic debt restructure will hurt commercial banks which have already taken a hit on mark-to-market losses.

Holders of domestic debt have seen the real value already slashed as the rupee fell from 200 to 360 to the US dollar.Bank would also have to take a hit on International Sovereign Bonds.

The central bank was in discussions on bank on any impact on debt treatment, Governor Weerasinghe said.adding We are talking to banks,” We thing we can manage it.”

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