By Sri Lanka finds itself under considerable pressure to swiftly secure agreements with its creditors, including bondholders, before the looming deadline in June. Daily Mirror has learned that this urgency stems from the impending arrival of the third tranche of the International Monetary Fund (IMF) extended fund facility, anticipated to be around US $337 million.
Preceding the disbursement of funds, Sri Lanka is tasked with finalizing crucial agreements. Firstly, it must sign a Memorandum of Understanding (MoU) with the Paris Club of Nations to restructure bilateral debts. Simultaneously, negotiations are underway to strike a separate deal with China, ensuring terms that are agreeable to all bilateral creditors.
Preliminary Agreements
A government source, when approached for comment on the matter, revealed that the government aims to reach preliminary agreements with commercial creditors, including bondholders, prior to the IMF tranche disbursement.
Adding to the complexity of the situation is the looming presidential election scheduled for later in the year. With the Election Commission expected to issue the gazette notification by the end of June, the government faces heightened challenges in finalizing the debt restructuring process amidst the political landscape’s uncertainty.
Sri Lanka’s financial woes have been exacerbated since it declared bankruptcy in April 2022, leading to a default on payments totalling US $6 billion. In light of this, the government has outlined a plan to address its outstanding debts. It aims to settle 37% of debts within the initial six years following the resumption of debt servicing, with a further 51% to be addressed within 6 to 20 years, and the remaining 12% after the 20-year mark.
Cabinet spokesman Minister Bandula Gunawardane reassured that regardless of the election outcome, the government is committed to continuing debt servicing according to the approved plan.
