Sri Lanka to reach US $13bn debt restructure agreement with official creditors soon
By: Staff Writer
January 28, Colombo (LNW): Sri Lanka is aiming to negotiate a debt restructuring with holders of its defaulted US dollar bonds within “a couple of months”, the Governor of the Central Bank Nandalal Weerasinghe said despite complaints by private creditors that they are being left in the dark.
CB Governor further mentioned that Sri Lanka needs to reach an agreement “within a couple of months” on restructuring the USD 13bn of debt, but he went on to dismiss worries that negotiations have become bogged down.
“There’s a lot of interest from private creditors to finish this as soon as possible. But because of the procedure it takes a certain time . . . We also want to do that fast,” the CB governor has said.
He noted that Sri Lanka must “ensure whatever proposals we have exchanged are consistent with the [IMF’s] debt sustainability analysis and also comparable [with] we have been discussing with other creditors. That’s a bit of a complicated process.”
Sri Lanka will need to show it is still talking to bondholders in good faith in order to secure the next $330mn tranche of the IMF programme, which is up for review in March.
The island also faces the risk that it will be meeting some creditors in the courts rather than around a negotiating table.
Hamilton Reserve Bank, a St Kitts and Nevis-based creditor that is not part of the bondholder committee, has been seeking immediate repayment on about $250mn of Sri Lanka debt through the US courts.
In November, a judge stayed the case until February 29 in order to allow negotiations with other bondholders to proceed.
In response to a question on how the lawsuit might affect the debt negotiations, Dr. Weerasinghe has said that those are “two parallel processes running independently”.
He has ensured that Sri Lanka is “taking into consideration and being mindful about any implications of delay or not delay in judgment”.
Citing people familiar with bond holders’ thinking, he said a ruling in Hamilton Reserve Bank’s favour would complicate talks even if its claim would be difficult to enforce, and might lead other frustrated creditors to turn to the courts.
If Sri Lanka does not secure a deal soon, “you’re going to see pressure building on bondholders to abandon the consensual process and start looking after themselves”, a person familiar with discussions was quoted as saying.
Under its IMF programme, Sri Lanka is undergoing a series of economic reforms including raising taxes and privatising state companies such as its national carrier Sri Lankan Airlines.