After Sri Lanka reached an agreement with the official creditor committee on debt treatment on Wednesday the country is now looking at finalising similar agreements with remaining bilateral creditors. These include Saudi Arabia, Pakistan, Kuwait and Iran. The total amount in this regard is for around USD 274 million in outstanding claims.
“Sri Lanka will now focus efforts on reaching comparable debt restructuring agreements with external commercial creditors, and in particular with its holders of international sovereign bonds,” said CT CLSA Securities (Pvt) Limited in their comment.
The Government on November 29, 2023 officially announced that it has reached an agreement in principle with its Official Creditor Committee (OCC) on the financial terms of debt treatment and proposed a debt restructuring plan with Japan, India and France co-chair the OCC. The agreement in principle covers around UAD 5.9 billion of outstanding public debt and consists of a mix of long-term maturity extension and reduction in interest rates.
“The agreement will facilitate a swift approval by the IMF Executive Board of the First Review of Sri Lanka’s IMF-supported program, allowing the next tranche of the IMF financing of around US$334 mn to be disbursed,” CT CLSA Securities said.
The agreed-upon debt treatments will be further detailed and formalized in a MoU between Sri Lanka and the OCC, which will then be implemented through bilateral agreements with each OCC member.