Sri Lanka's $12.5b debt restructuring backed by IMF, bilateral creditors

COLOMBO:

Sri Lanka's $12.5 billion bondholder debt rework has received support from bilateral creditors and the International Monetary Fund, the finance ministry said on Friday, a huge boost to the island nation's fragile economy.

Sri Lanka defaulted on its foreign debt for the first time ever in May 2022, engulfed in a severe crisis and buckling under its high debt burden and dwindling foreign exchange reserves.

Last month, it reached a draft deal with creditors to restructure $12.5 billion of international bonds, and said on Friday it had got backing from the IMF and its bilateral creditors, including India, China and Japan for the same.

Sri Lanka's finance ministry said in a statement it had received formal confirmation from the Official Creditors Committee that the terms of the Agreement in Principle were compatible with the Comparability of Treatment principle.

An IMF delegation was also in Colombo to discuss latest economic developments and reforms under Sri Lanka's economic programme supported by the IMF ahead of the third review of the bailout deal, the approval of which will see the disbursement of a fourth tranche of about $337 million.

"The IMF team will continue its close engagement with Sri Lanka’s economic team to set a date for the third review of the IMF-supported programme," said Krishna Srinivasan, director of the IMF's Asia Pacific department, at the completion of the trip on Friday.

Earlier on Friday, Sri Lanka said it had appointed Citigroup Global Markets Inc (Citi) as the dealer manager for its proposed sovereign bond exchange and that Citi in turn had appointed legal firm Hogan Lovells to advise it.

The process of issuing new bonds was likely to be completed within 10 weeks, the finance ministry said in a separate statement on Friday.

The country's new government, under President Anura Dissanayake, said on Thursday it planned to move ahead with the third review of its nearly $3 billion programme of support from the International Monetary Fund.

Further discussions with the IMF will take place later this month when a Sri Lanka delegation, led my its central bank governor, meets during the annual IMF meetings in Washington.