The Ad Hoc Group of Sri Lanka Bondholders, known as the Bondholder Group, has expressed willingness to engage with the Sri Lankan authorities in debt restructuring negotiations, PR NewsWire reported.
In a letter to the International Monetary Fund (IMF) Managing Director, the Bondholder Group stated that it is willing to engage in this regard through its Steering Committee.
The Bondholder Group further confirmed it is prepared to engage in negotiations consistent with the parameters of an IMF Programme and the targets specified in the IMF Programme.
The group has acknowledged the Sri Lankan authorities’ engagement with their official creditors towards a resolution of the current crisis and restoration of debt sustainability.
It further acknowledged that such engagement has recently resulted in the Government of India delivering letters of financing assurances, committing to support Sri Lanka and contribute to its efforts to restore debt sustainability by providing debt relief and financing consistent with the IMF Extended Fund Facility Arrangement and the IMF Programme targets.
Similarly, the Bondholder Group through its Steering Committee 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 regain access to the international capital markets during the IMF Programme period, it said in its letter to the IMF.
It added that based on the limited information available to us at this time, including information contained in the India Letter, we understand that the IMF Programme’s debt sustainability targets are identified as
(i) reducing the ratio of public debt to GDP to 95% by 2032,
(ii) limiting the central government’s annual gross financing needs to GDP ratio to 13% in the period between 2027 and 2032, and central government annual foreign currency debt service at 4.5% of GDP in every year between 2027 and 2032 and (iii) closing of the external financing gap.
The Bondholder Group further stated that thereby it is prepared to engage with the Sri Lankan authorities in restructuring negotiations, which the Bondholder Group understands to be the targets identified in the India Letter; it is recognized that these negotiations will necessarily be further informed by the receipt of the forthcoming DSA.
The Bondholder Group added that the finalization of an agreement will also be subject to the satisfaction of the following conditions:
- The central government’s domestic debt – defined as debt governed by local law – is reorganized in a manner that both ensures debt sustainability and safeguards financial stability. Assuming that annual gross financing needs should not exceed 13% of GDP in the period between 2027 and 2032, whilst allowing for central government annual foreign currency debt service to reach 4.5% of GDP in every year between 2027 and 2032, domestic gross financing should therefore be limited at 8.5% of GDP for the period 2027-2032.
- While we recognize that the determination of the economic assumptions underpinning the IMF Programme Targets is ultimately the responsibility of the IMF and that the overall design of the IMF Programme is one that is negotiated between the IMF and Sri Lanka, it is nevertheless important that the Bondholder Group has the opportunity to express its views on both the economic assumptions underpinning these IMF Programme Targets and the adequacy and feasibility of the adjustment efforts contemplated under the IMF Programme. When considering any restructuring proposal that is made to the Bondholder Group, it is the Bondholder Group’s intention to take into consideration the extent to which the economic assumptions and the adjustment efforts are consistent with these views.
- Recognizing the important commitments made by India in the India Letter, the Sri Lankan authorities will apply the principle of comparable treatment in respect of the debt relief requested and obtained from all their remaining official bilateral creditors. (NewsWire)