Sri Lanka is ready to engage with the United States in strengthening trade relations, the island nation said on Friday, committing to substantially reduce tariff and non-tariff barriers that hinder trade and investment. U.S. President Donald Trump's government imposed a 44% tariff, which will affect about $3 billion of exports, Sri Lanka's finance ministry said in a statement. Sri Lanka is concerned the tariffs will hurt its economy, which is recovering from a severe financial crisis triggered by a shortfall of dollars three years ago.
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Sri Lanka's central bank held its overnight policy rate steady on Wednesday to underpin a stronger economic recovery as the country gradually pulls ahead from its worst financial crisis in decades, Reuters reported. The decision, which leaves the key rate at pre-crisis levels, comes just days before the new government's first full-year budget due to be presented in Parliament next month.
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Sri Lanka gained extensive support from private creditors to restructure its international bonds, a key step for the country to exit an extended default, Bloomberg News reported. Investors representing close to 98% of the country’s $12.6 billion in dollar bonds are expected to agree to swap their securities for new notes, the government said, citing preliminary results of its consent solicitation for the exchange. Once confirmed with official results on Dec. 16, the widespread support would mean that the debt restructuring should be completed before year-end.
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Sri Lanka is kicking off an exchange to swap $12.6 billion of its bonds for longer-dated notes as it seeks to complete its dollar-denominated debt restructuring, Bloomberg News reported. Investors in the country’s bonds can tender their holdings for new international bonds with a haircut ranging between 12 cents and 16 cents on the dollar, according to calculations made by Bloomberg and based on a statement sent to bondholders. A creditor committee holding about 40% of the bonds said in a separate press release it supports the offer.
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Sri Lanka’s New President Says He’ll Restart Talks with the IMF to Find a Way Out of Economic Crisis
Sri Lanka’s new President Anura Kumara Dissanayake said Wednesday that he will soon resume discussions with the International Monetary Fund and foreign creditors to plot a way out of the worst economic crisis in the country’s history, the Associated Press reported. “We expect to discuss debt restructuring with the relevant parties and complete the process quickly and obtain the funds.,” he said. The future of the economic recovery plan drafted by former liberal President Ranil Wickremesinghe was called into question after Dissanayake, a Marxist, won the presidential election on Saturday.
The International Monetary Fund said it’s looking forward to working with Sri Lanka’s newly elected leftist president, including on the latest review of the country’s $3 billion bailout package, Bloomberg News reported. “We will discuss the timing of the third review of the IMF-supported program with the new administration as soon as practicable,” the organization said in a statement after President Anura Kumara Dissanayake was sworn into office on Monday.
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A legal change in the bonds that will emerge from a debt restructuring in the South Asian island of Sri Lanka could set a precedent for sovereign debt contracts, Bloomberg News reported. The country’s officials and its international bondholders have agreed to keep New York as the governing law of new notes to be issued under a $12.6 billion rework, but are introducing a mechanism that allows creditors to request a change to English or Delaware law, according to a government statement on Thursday.
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Sri Lanka said that has reached an agreement in principle with bondholders to restructure about $12.6 billion in bonds, just two days before the country heads to elections that have rattled investors, Bloomberg News reported. The government and bondholders agreed on terms including a “27% haircut on the nominal amount of existing bonds,” according to a statement released Thursday at the conclusion of a third round of talks. A previous statement in July referred to a 28% haircut.
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