Rs. 3 trillion allocated to settle debt restructuring, ISBs

Sri Lanka is in a quandary of settling massive debt restructuring and the repayment of International Sovereign Bonds (ISBs) next year with an unprecedented debt service load of US$ 5.38 billion next year finance ministry data shows.

The government will have to repay the accumulated foreign debt service payment amounting $$4.38 billion and settle $ 1billion ISBs which will mature in March 2024.

With a view of tackling this situation, a sum of Rs. 3 trillion (equivalent to $8.64 billion) has been allocated by the 2024 budget for the implementation of foreign debt restructuring and settlement of International Sovereign Bonds, State Minister of Finance Ranjith Siyambalapitiya said.

Accordingly, for the settlement of existing ISBs, budget allocations are essential to record the transaction in the government book of accounts," he pointed out adding that Rs. 3 trillion will be allocated for this purpose.

Sri Lanka currently has to settle $12.5 billion in ISBs and this was categorised as commercial debt and most of ISB’s maturity periods will fall on 2024, 2025, 2026, 2027, 2028 and 2029 and each and every ISB has different dates of maturity and varied interest rates, Finance Ministry data shows.

In light of this urgent and unforeseen requirement, the government has to spend Rs 3.45 trillion out of the tax revenue of Rs 3.8 trillion or domestic borrowings.

The ministry is working out plans to meet payments and raise money attracting foreign inflows for rupee bonds with forex caps without money printing, he added.

Sri Lanka’s borrowing limit for 2024 has increased by Rs. 3,450 billion to Rs. 7,350 billion from Rs. 3,900 billion to meet any eventuality.

US dollar denominated new financial instruments are to be issued to settle existing ISBs.