Eastern Eye (UK)

Sri Lanka to consult commercial creditors on debt restructur­ing

- (Reuters)

SRI LANKA aims to announce a debt-restructur­ing strategy in April and step up talks with commercial creditors ahead of an Internatio­nal Monetary Fund review of a bailout package in six months, the nation’s central bank governor told Reuters.

The island has secured financing assurances from all its major bilateral creditors, including India and China, and so has set the stage for the IMF to give its final approval for a $2.9 billion (£2.38bn), four-year bailout package on March 20, the multilater­al lender said last Tuesday (7).

The bailout is the culminatio­n of months of negotiatio­ns as Sri Lanka looks to emerge from its worst economic crisis in more than seven decades.

“When you see the staff level agreement published - that will contain our commitment to debt restructur­ing and that will also reveal medium-term debt targets for us to restore debt sustainabi­lity on a long-term basis,” central bank Governor P Nandalal Weerasingh­e said last Thursday (9).

“So somewhere in April we will announce ... how we are going to meet those medium-to-longterm (debt) targets. That is the next step.”

Weerasingh­e said the country would expedite negotiatio­ns with commercial creditors and announce the debt restructur­ing strategy in consultati­on with them, before finalising the debt restructur­ing terms.

“We are trying to finalise this in about the next six months’ time, so before the next (IMF) review will be completed,” he said.

Sri Lanka would need to restore debt sustainabi­lity over a ten-year period as per the agreement with the IMF and the latter will provide a roadmap to bring down debt levels over that period, Weerasingh­e said.

Currently, Sri Lanka has to repay about $6bn annually until 2029, president Ranil Wickremesi­nghe told parliament last Tuesday, but Weerasingh­e said this amount will be reduced post-debt restructur­ing.

The central bank has also been gradually topping up reserves, with useable dollars reaching about $600 million at the end of last month - the highest in a year.

Sri Lanka also has a $1.5bn swap arrangemen­t with China but that can only be used if domestic reserves support three months of imports.

“If we build up reserves we may be able to access the (China) swap, until then we don’t mind keeping it in our books.

“If we meet the conditions of three months of reserves, we can use it.”

Weerasingh­e also said inflation is likely to come down faster than earlier forecast, even by the central bank. Rising prices have been a key concern with the latest print in February showing inflation had eased, but remained above 50 per cent.

 ?? ?? TOUGH TIMES: Rising prices have been a key concern for Sri Lanka but inflation is likely to come down faster than earlier forecast
TOUGH TIMES: Rising prices have been a key concern for Sri Lanka but inflation is likely to come down faster than earlier forecast
 ?? ?? AMBITIOUS: Amit Bhatia
AMBITIOUS: Amit Bhatia

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