Staff Writer
Half of Sri Lanka’s domestic debt, or around $19.8 billion in local bills and bonds, are being sought to be restructured in an effort to lessen the country’s financial obligations.
The country’s dollar bonds increased.
According to Deputy Treasury Secretary A.K. Seneviratne, the central bank owns 2.6 trillion rupees worth of bills and around 3.5 trillion rupees ($11.4 billion) worth of bonds as part of the country’s domestic debt optimization. The remainder consists primarily of dollar-denominated bonds held by domestic institutions.
In accordance with a $3 billion bailout program it obtained from the International Monetary Fund in March, Sri Lanka is attempting to restore debt sustainability. Lanka wants to restructure its local debt for $19.8 billion.
According to the IMF, the country of South Asia had about $38 billion in domestic debt and $41 billion in foreign borrowings as of 2022.
According to Patrick Curran, a senior economist at Tellimer located in Portland, Maine, “the proposal strikes a balance by satisfying the need for burden sharing without creating too much risk to financial stability.” It also gives a sneak peek at what external creditors may be expected to deliver, which, in our opinion, hints to recovery values of between 40 and 50 cents on the dollar.
The price of Sri Lanka’s dollar bonds due 2030 increased by 4.6 cents on Friday to roughly 47 cents per dollar. Local markets will reopen on Tuesday after a holiday closure.
After declaring default in 2022, Sri Lanka’s efforts to revive its economy have focused heavily on the debt plan. For the country to continue to receive funds under the IMF bailout, creditors must agree.
