The International Monetary Fund has welcomed the announcement of an agreement in principle between Sri Lanka and international bondholders’ representatives, subject to confirmation on comparability of treatment by Sri Lanka’s Official Creditors Committee.
“This represents significant progress in Sri Lanka’s debt restructuring process,” said a spokeperson for the IMF. The spokesperson added that the IMF will discuss the timing of the third review of the IMF-supported program with the new administration as soon as practicable.
Sri Lanka announced that it has reached Agreements in Principle on the restructuring of approximately USD$ 17.5 billion of external commercial debt (as of end 2023).
These agreements have been reached with holders of its International Sovereign Bonds, following negotiations with the Ad Hoc Group of Bondholders (“AHGB”), a representative group of international investors, and the Local Consortium of Sri Lanka (“LCSL”), a representative group of domestic financial institutions.
Collectively, the two groups hold in excess of 50% of the Bonds.
Under the agreements, holders of the Bonds will be consenting to a present value concession of 40.3% in the baseline scenario, calculated with a discount factor of 11%.
Sri Lanka also announced that it has finalized agreement in principle with China Development Bank (“CDB”) on the key financial terms of the restructuring of approximately US$ 3.3bn of sovereign debt.
As a result of the agreements already achieved with Eximbank of China and members of Sri Lanka’s Official Creditor Committee (“OCC”) as well as CDB and bondholders, Sri Lanka will have obtained over USD 17bn of debt service relief during the IMF program period.
USD 2.4bn from Eximbank of China, USD 2.9bn from the OCC, USD 2.5bn from CDB and USD 9.5bn from the bondholders.
The agreements in principle with the Group, the LCSL and CDB, which were approved by the Cabinet of Ministers of Sri Lanka earlier yesterday, almost completes Sri Lanka’s sovereign debt restructuring exercise, as agreed under Sri Lanka’s IMF-supported Program
