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Cabinet Co-Spokesman and Minister Bandula Gunawardana
By Charumini de Silva
The Government announced yesterday that the much-awaited debt restructuring framework to negotiate with creditors would be ready in May.
“Debt restructuring process is the biggest challenge Sri Lanka is facing now. However, President Ranil Wickremesinghe is confident that a framework for debt restructuring negotiations will be ready within May,” Cabinet Co-Spokesman and Minister Bandula Gunawardana said at the post-Cabinet meeting media briefing yesterday.
He confirmed that the two expert firms appointed by the Government ─ Lazard Institute of France and Clifford Chance LLP are working on a debt restructuring program.
“The teams are constantly negotiating with the external creditors. There will be more conversations on the matter with representatives from two expert teams, the International Monetary Fund, the Treasury, and the Central Bank participating,” he added.
Gunawardena said President Wickremesinghe informed the Cabinet of Ministers that he took part in several meetings via video technology with the Finance Ministers of France, Japan and India.
On 12 April last year, Sri Lanka announced a pre-emptive negotiated default of all external debt as of that date after it was realised the status was not sustainable. As of the end of 2021, Sri Lanka’s external debt amounted to $ 51 billion whilst the figure is likely to have ballooned following the sharp depreciation of the rupee.
The Cabinet Co-Spokesman said the bulk (around 35%) of the external debt is the expensive International Sovereign Bonds whilst the rest is held by the Paris Club members including Japan, the UK, the US, Germany and non-Paris Club creditors including China and India.
Noting China, India, and Japan are the key creditors of Sri Lanka he said that the other borrowers were also approached correspondingly. “From 2004 to 2014 the total sovereign bonds issued was $ 5.5 billion, but during the four years of 2015 to 2019, the Government issued bonds worth $ 12.05 billion sovereign bonds. These have been traded among many international markets such as the US, Germany, the UK, and France. Tracing these bonds was a tedious and complex task,” he added.
On 1 September 2022, the Government reached a Staff-Level Agreement with the International IMF for an Extended Fund Facility of $ 2.9 billion and on 21 March 2023 its Executive Board approved a 48-month extended arrangement to support Sri Lanka’s economic policies and reforms. However, before the disbursement of the bailout package, all creditors must agree to restructure their existing loans with Sri Lanka and come up with a plan.
“The need to make progress in the negotiations swiftly cannot be stressed enough. We want to avoid the crisis from becoming worse,” Gunawardena added.
Discussions with the private creditors must also be conducted simultaneously and Sri Lanka met private creditors in Washington in April.
