Sri Lanka

Holders of Sri Lanka's international sovereign bonds face a 20% principal haircut in the country's debt restructuring as well as maturity extensions and a reduction in coupons, according to a Barclays report, Reuters reported. Investors' focus has shifted to the restructuring of Sri Lanka's $13.4 billion sovereign dollar bonds after Colombo got final sign off on a $3 billion programme from the International Monetary Fund (IMF) earlier this week, a financial lifeline in its bid to recover from its worst economic crisis in more than seven decades.

The executive board of the International Monetary Fund approved a loan worth $3 billion to help Sri Lanka through the financial crisis that has had the nation in a rolling economic and political crisis for more than a year, the New York Times reported. The I.M.F. had agreed in principle to extend the funds last September — subject to Sri Lanka’s meeting a series of conditions that included tightening its finances and renegotiating the terms of repaying debt it owes to the biggest economies in Asia.

Sri Lanka's foreign private creditors are considering proposing swapping the country's defaulted bonds for new securities where cash flow is linked to its economy's future growth, Retuers reported. Such bonds, known as state-contingent debt instruments, would be designed to automatically adjust variables such as coupon payments and maturities if the island nation's economy underperforms. The GDP-linked bonds would be based on International Monetary Fund's projections for Sri Lanka's economy. The latest IMF forecasts see it progressing from a 3% contraction in 2023 to a 3.1% growth in 2027.

The International Monetary Fund on Tuesday said Sri Lanka had secured financing assurances from all its major bilateral creditors, paving the way for the IMF board to consider approval of a long-awaited $2.9 billion four-year bailout, Reuters reported. The IMF said its board will meet on March 20 to review a preliminary staff-level agreement first signed in September, offering a lifeline to the South Asian country which faces its worst financial crisis since independence from Britain in 1948.

Sri Lanka's recent tax rises are in line with international comparisons and needed to help creditors regain confidence, the International Monetary Fund said on Thursday, backing the crisis-hit country's effort to lock down a $2.9 billion bailout, Reuters reported. An IMF statement said the hikes, which included an up to 36% rise in income taxes, were essential to tackle revenue collection that has been low by global standards. External financing would not bridge the gap needed to fund essential expenditure, the statement added.

A group of overseas private creditors is ready to hold debt restructuring talks with Sri Lanka consistent with the International Monetary Fund's programme, their legal adviser said on Friday, Reuters reported. The group "stands ready to engage quickly and effectively with the Sri Lankan authorities to design and implement restructuring terms that would help Sri Lanka restore debt sustainability and allow the country to re-gain access to the international capital markets," the creditor's legal adviser said in a letter to the Washington-based lender.

The Paris Club of creditor nations is ready to provide financing assurances to Sri Lanka, a key step needed to unlock a $2.9 billion bailout by the International Monetary Fund (IMF), two sources with direct knowledge of the matter told Reuters. The informal group of bilateral lenders is set to announce its support to the crisis-hit nation on a debt overhaul "soon", said one of the sources, who asked not to be named because the talks are private.

On the surface, calm has returned to Sri Lanka since the South Asian nation plunged into political chaos and virtual bankruptcy last summer, according to a New York Times analysis. Gone are the fuel lines that snaked for blocks; a seaside expanse that had been the site of a monthslong protest encampment was resplendent over the holidays with Christmas lights and carnival rides. But underneath, the island nation’s economy remains on a ventilator, with the government yet to secure a way out of crushing debt. Many young people are desperately trying to find a way out of the country.

Debt-stricken Sri Lanka’s Central Bank chief said Wednesday that the country is making good progress in talks with its creditors to obtain financial assurances for debt restructuring, an important step toward finalizing an International Monetary Fund rescue plan, the Associated Press reported. Sri Lanka is bankrupt and has suspended repayment of its $51 billion foreign debt, of which $28 billion must be repaid by 2027. It has reached a preliminary agreement with the IMF for a $2.9 billion rescue package over four years.

The Export-Import Bank of China has offered Sri Lanka a two-year moratorium on its debt and said it will support the country's efforts to secure a $2.9 billion loan from the International Monetary Fund, according to a letter reviewed by Reuters. Regional rivals China and India are the biggest bilateral lenders to Sri Lanka, a country of 22 million people that is facing its worst economic crisis in seven decades.