Sri Lanka will not agree with any debt relief proposal from bondholders that is not consistent with the debt sustainability (DSA) targets of the International Monetary Fund (IMF), Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe said.
Speaking at an event held by the Ceylon Chamber of Commerce (CCC) on Friday (2), he said that any proposal by the commercial creditors on debt restructuring should be consistent with the debt sustainability targets set out by the IMF as the whole idea of debt restructuring is to restore debt sustainability.
“Any solution that will not restore debt sustainability, I don't think we are going to agree,” he said.
Last October (2023), Sri Lanka rejected a proposal by an ad hoc group of bondholders, organised by advisers including Rothschild & Co. which submitted a proposal to Sri Lanka that included taking a 20% haircut and issuance of new debt, including a so-called macro-linked bond.
“We have been working very closely with them (commercial creditors), there is already a lot of speculation in the market, I don't think it is appropriate to comment on those speculations but all I can say is that we are working very transparent, open (manner) and we have already announced the relief we want from commercial creditors,” Dr. Weerasinghe said.
He added that Sri Lanka is willing to agree to any solution by commercial creditors that will restore debt sustainability based on the macro framework and projections of the IMF and their projections.
“I am confident we can come to an agreement very soon,” he said.
Moreover, the CBSL Governor said that Sri Lanka is about to sign Memorandums of Understanding (MoUs) with the bilateral creditor and start repaying Sri Lanka’s obligation on a restructured basis.
Last week, the Financial Times reported that Sri Lanka’s debt negotiations with bondholders have “not seen any significant progress” since December (2023) even after the bondholders committee that included fund firms BlackRock and Amundi complained about lack of transparency and substantive engagement.