Sri Lanka Economic Crisis: Govt And Opposition Trade Barbs Over Failure To Teach Bondholder Agreement

Sri Lanka Economic Crisis: Govt And Opposition Trade Barbs Over Failure To Teach Bondholder Agreement

The main opposition's economy spokesman Harsha de Silva in a statement said they were disappointed with the lack of transparency in the debt restructuring process.

PTIUpdated: Thursday, April 18, 2024, 02:22 PM IST
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Sri Lanka continues to engage all debt restructuring negotiations in good faith, within principles of equitable treatment among creditors with maximum transparency, the government has said as it faced criticism from the Opposition for maintaining secrecy over the debt restructuring process.

The government on Tuesday announced that it failed to reach an agreement with its international bondholders for restructuring around USD 12 billion in debt.

The main opposition's economy spokesman Harsha de Silva in a statement said they were disappointed with the lack of transparency in the debt restructuring process.

Haircut Rejected By Bondholders

"It is clear that the participating bondholders do not want to move away from the original structure they proposed based on the performance of the Sri Lanka economy to be measured on their much higher alternative baseline as opposed to that of the IMF".

The government statement said it had considered two separate proposals by the bondholders and the government proposal for a 28 per cent haircut had been rejected by the bondholders.

Responding to criticism, Shehan Semasinghe, the state minister of finance, said that the government was keen to engage all debt restructuring negotiations in good faith within the principles of equitable treatment with maximum transparency.

"It is well understood that given the price-sensitive nature of the negotiations, and according to market regulations, discussions with the Group and its advisors are to be conducted under non-disclosure agreements. This evidently restricts the ability of the Government to unilaterally report about the substance of the discussions," he said in a statement.

Semasinghe said that the next step would entail further consultations with the International Monetary Fund (IMF) on assessments of the compatibility of the latest proposals and discussions would be continued with the bondholders.

IMF's Lanka Bailout

Sri Lanka was hoping to complete the full programme of external debt restructuring by June to meet the targets of the IMF's USD 2.9 billion four-year bailout conditions.

In March, the IMF said it had reached a staff-level agreement with Sri Lanka for the next phase, enabling it access to USD 337 million from the bailout approved in 2023 for the island nation.

Two tranches of USD 330 million each were released in March and December 2023, even as the global lender praised Colombo for its macroeconomic policy reforms, which it said "are starting to bear fruit".

It's been two years since Sri Lanka declared its first-ever default on sovereign debt.

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