Home » USA, ADB and IMF pledge support for Sri Lanka’s debt restructuring process

USA, ADB and IMF pledge support for Sri Lanka’s debt restructuring process

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May 04, Colombo (LNW): Consequent to Sri Lanka and its external bond holders efforts to reach a consensus on the US$ 12 billion sovereign debt by mid-May or early June the USA and ADB have assured their fullest support in Sri Lanka’s debt restructuring process, State Minister of Finance Shehan Semasinghe stated 

The International Monetary Fund (IMF) stands ready to support Sri Lanka’s discussions with international bondholders and will provide a formal assessment after the parties reach a tentative agreement-in-principle, an IMF spokesperson said

State Minister of Finance Shehan Semasinghe met with Robert Kaproth, Deputy Assistant Secretary of the US Treasury at the Asian Development Bank annual meeting in Tbilisi, Georgia.

“The progress achieved in debt restructuring process was discussed at length. Mr. Robert Kaproth once again assured fullest support of USA to Sri Lanka and pointed out the importance of continuation with the reforms that will enable a stable economy and avoid any future crisis.

Semasinghe also met with Yingming Yang, Vice-President (South, Central, and West Asia) of ADB. “We discussed on the new Country Partnership Strategy 2024–2028 and the ADB’s support to the country’s efforts to restore macroeconomic stability.”

Progress of the economy and debt restructuring process were discussed, and Yang “reaffirmed the strong commitment of ADB to support Sri Lanka.” Semasinghe said on X

However the “Steering Committee” of the Bondholders and Sri Lankan authoritative team of officials will continue discussions with the international sovereign bondholders’ following the inconclusive talks recently in London, Deputy Secretary to the Treasury M P Rathnayake announced.  

These discussions will be continued with a view to reaching common ground ahead of the IMF board consideration of the second review of Sri Lanka’’s US$ 2.9 billion  EFF program  ,he said.

If an agreement on external debt restructure is not reached by June, Sri Lanka’s elections may complicate the negotiations or, delay the debt restructure deal till 2025. 

During the Meetings, it was agreed that the primary basis for the discussions would be the Group’s March Proposal. 

Sri Lanka expressed the main reservations it had in relation to the Group’s proposed Macro-Linked Bond (“MLB”) – while members of the Steering Committee put forward the reasons why they believed the terms of their MLB proposal were fair and reasonable.

They have suggested to include contingency clauses to increase payments to them if/when the country reaches positive economic results. These contingency clauses ensure more benefits for the private creditors if the country does well, but they do not include reduced payments if there is a negative shock, he added. 

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