Forthcoming elections might affect debt talks – former Treasury Secy
Sri Lanka and its external bondholders are under immense compulsion to reach a consensus on the US$ 12 billion sovereign debt in the next few weeks by mid-May or early June before the country’s presidential/general elections this year, Finance Ministry sources affirmed.
But if an agreement on external debt restructure is not reached by June, Sri Lanka’s elections may complicate the negotiations or, delay the debt restructure deal till 2025, a former treasury secretary, who has wide knowledge on IMF procedures, told the Business Times.
The “Steering Committee” of the Bondholders and Sri Lankan authoritative team of officials will continue discussions with the international sovereign bondholders’ following the inconclusive talks during past three weeks in London, Deputy Secretary to the Treasury M P. Rathnayake said. These discussions will be continued with a view to reaching common ground ahead of the IMF board consideration of the second review of Sri Lanka’s $ 2.9 billion EFF programme, he said. Sri Lanka expressed the main reservations it had was in relation to the Group’s proposed Macro-Linked Bond while members of the Steering Committee put forward the reasons why they believed the terms of their MLB proposal were fair and reasonable. The Steering Committee did not agree to an extension of the restricted discussions upon expiration of the current restricted period, Mr. Rathnayake disclosed.
The International Monetary Fund (IMF) stands ready to support Sri Lanka’s discussions with international bondholders and will provide a formal assessment after the parties reach a tentative agreement-in-principle, an IMF spokesperson said on Thursday.
“We hope an agreement consistent with the parameters of the IMF-supported program and official creditors’ Comparability of Treatment requirements can be reached soon, ahead of completing the second review under the programme,” she added.
| Debt discussions need to play out further – Analysts | |
| By Duruthu Edirimuni Chandrasekera
The recent stalemate in bondholder talks will not be the end of the world at least for the banking sector, since most banks have made large provisions against possible haircuts against the bonds, analysts say. During the restricted period, the parties were unable to reach an agreement on the terms of restructuring the US $ 12 billion debt. Despite this, the Steering Committee expressed its willingness to consider Sri Lanka’s requests for changes to important structural aspects, with certain conditions. Analysts noted that unless the bondholder terms are significantly different, there won’t be any incremental change in the bank’s stance. A senior economist noted that it should not be expected that these discussions will get it right in the first few rounds. “These discussions will come through, but you cannot get it right from day one. Understandably, the main government-to-government discussions will put some pressure on the bondholders. I feel that there will be a couple of more rounds of discussions,” he said. The Steering Committee and both parties involved in the discussions have decided not to extend the restricted period beyond its expiration. This means that the discussions will no longer be limited to certain topics or participants. It is important to note that both parties have expressed a willingness to continue engaging with each other in good faith, an economist said. “They remain committed to finding common ground and reaching a resolution soon.” Economists also noted that tourism growth will fetch the most wanted dollars while the fundamentals such as taxation are in the right direction. “We cannot put everything right with the click of a button. It is important to take a measured view,” a second banker said. |
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