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Sri Lanka strikes non-public debt restructuring take care of bondholders

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Sri Lanka State Minister of Finance Asanka Shehan Semasinghe.
| Photo Credit: EMMANUAL YOGINI

Sri Lanka has reached a debt restructuring take care of the worldwide sovereign bondholders after protracted negotiations, state Finance Minister Shehan Semasingher mentioned on July 4, calling it a “crucial step” within the cash-strapped nation’s efforts to revive debt sustainability.

In an announcement, State Minister of Finance Mr. Semasinghe mentioned that an settlement on restructuring phrases was reached on July 3, finishing Sri Lanka’s debt restructuring course of.

“ISBs (International Sovereign Bonds) account for $12.5 billion out of the total external debt of $37 billion. This agreement is a crucial step in our efforts to restore debt sustainability,” Mr. Semasinghe mentioned.

He added that the settlement with non-public bondholders was topic to the approval by the official creditor committee of countries, together with India.

“This marks another key milestone in our journey towards economic revival and strengthening,” he mentioned.

Officials mentioned the anticipated haircut agreed upon would quantity to twenty-eight%, with an upfront cost to ISB holders commencing from September this yr.

Officials mentioned this completes Sri Lanka’s debt restructuring course of, which got here as a prerequisite for debt sustainability within the ongoing International Monetary Fund (IMF) bailout of $2.9 billion prolonged in March 2023 over a interval of 4 years.

It follows the finalisation of debt restructuring agreements with bilateral lenders, together with India and China, in Paris on June 26, which President Ranil Wickremesinghe described as a “significant milestone” for bolstering worldwide belief within the debt-ridden economic system.

Sri Lanka declared its first-ever sovereign default in mid-April 2022, having run out of its international alternate reserves. The halt to the debt providers meant that the multilateral creditor nations and industrial lenders couldn’t lengthen recent financing to the nation.

The authorities confronted criticism from the principle Opposition after final week’s announcement on bilateral debt restructuring, who claimed that the federal government had failed to realize one of the best answer for the nation.

Dismissing the Opposition’s criticism of debt restructuring as “inaccurate,” President Wickremesinghe, additionally the finance minister, mentioned, “No bilateral creditor would agree to a reduction of principal amount. Instead, concessions are allowed through extended repayment periods, grace periods and lower interest rates.” A two-day parliamentary debate was postponed because the Opposition demanded agreements to be furnished.

Mr. Wickremesinghe mentioned he would submit all agreements and paperwork relating to debt restructuring to a Parliament committee upon reaching a take care of the non-public bondholders.

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