Treasury saved USD 759 million after interim debt policy of not servicing foreign loans

Since the government declared bankruptcy in April and stopped servicing dollar nominated foreign loans, it was able to save up to USD 759 million-nearly 41 per cent of foreign currency reserves that remained by December the previous year. 

According to the recent investor presentation compiled by Ministry of Finance, Economic Stabilization and National Policies that was held last Sunday to provide an update to Sri Lanka's creditors and ongoing negotiations of International Monetary Board (IMF), the Interim Debt Policy adopted by the government has resulted in a significant reduction in foreign currency debt service and strengthen country's foreign reserve in order to finance essential imports. 

Earlier, the Finance Ministry advised any holders of the Affected Debts (including International Sovereign Bonds(ISB), who wished to receive the Sri Lankan Rupee (RS) equivalent of any payments on such debts, to contact the Ministry, but it was put on hold due to administrative difficulties. 

"The authorities ultimately took the view that it was too difficult to pursue this option due to the limitations in the relevant documentation of some debts (notably the ISBs) and the current economic conditions in Sri Lanka. As a result, Sri Lanka is currently not making any payments on the Affected Debts in Sri Lankan Rupees," the communiqué said while stressing that the Ministry took noted of all such requests received, and will advise investors if the situation in relation to payments on the ISBs or other Affected Debts in Sri Lankan Rupees changed in the future.

Regarding debt ridden Sri Lankan Airlines, the communiqué added that authorities and their advisors are currently defining a strategy to address the company's operational and financial issues, in consultation with the company. 

Sri Lanka Airlines’ decision to pay both June and July coupons on its 2024 bonds does not prejudge of any decision regarding the inclusion or not of these series of bonds in the perimeter of debt considered for treatment currently, the communiqué said. "Sri Lanka Airlines took the decision to make this coupon payment from its own resources during the governmental crisis of July 2022 as the grace period on this payment was ending,"