Sri Lanka to restructure T-bills amounting to US$11.4 bn soon

The Sri Lanka Government is now facing the task of fulfilling several structural benchmarks including domestic debt optimisation (DDO) aimed at liquidity relief while preserving financial stability to avoid further eroding Sri Lanka’s repayment capacity, Finance Ministry sources divulged.

The part of the domestic debt or US $11.4 billion Treasury bill restructuring process is set to begin this month with the aim of finalising it in May this year.

A voluntary domestic debt operation was expected for the holders of $24 billion of T-bonds. Sri Lanka's total local currency debt is equivalent to $36.6 billion,

This was revealed at the virtual presentation for creditors conducted on Thursday emphasisng that Sri Lanka has already demonstrated a strong commitment to economic reforms.

Local currency creditors’ participation in a domestic debt optimisation will also help reaching the Debt Sustainability Analysis (DSA) targets.

Sri Lanka’s public debt has grown rapidly and has reached unsustainable levels while public debt trajectory is set to remain unsustainable in the absence of a comprehensive debt treatment. It is also facing a very significant external financing gap over the coming years.

The Government has to also obtain cabinet approval of a comprehensive strategy to restructure the balance sheets of key SOEs, parliamentary approvals of new anti-corruption legislation and the new Central Banking Act in Q2-2023.

The government is under obligation of revamping the VAT system by removing almost all product specific VAT exemptions while submitting the Public Financial Management (PFM) Law to Parliament during Q3 and Q4 -2023