Private bondholders tell IMF they are ready to hold debt restructuring talks with Lankan authorities

Sri Lanka’s private bondholders yesterday reached out to the International Monetary Fund (IMF) to share that they were willing to participate in the debt restructuring agenda.

The legal advisers of Ad Hoc Group of Sri Lanka Bondholders wrote to IMF Managing Director Kristalina Georgieva, stating 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.

Global investment companies Amundi Asset Management, Blackrock, HBK Capital Management, Morgan Stanley Investment Management and T. Rowe Price Associates Inc. are among the group of around 30 bondholders being advised by White & Case LLP, a New York-based law firm.

The group said it acknowledges the Sri Lankan authorities’ engagement with their official creditors toward a resolution of the current crisis and restoration of debt sustainability.

“The Bondholder Group further acknowledges that such engagement has recently resulted in the Government of India (in its letter to the IMF, dated January 16, 2023 (the ‘India Letter’)) 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 (the ‘IMF programme’) and the IMF programme targets indicated in the India Letter,” it pointed out.

The group shared that it understands that the IMF programme’s debt sustainability has identified targets, which are reducing the ratio of public debt to GDP to 95 percent by 2032, limiting the central government’s annual gross financing needs to GDP ratio to 13 percent in the period between 2027 and 2032 and central government annual foreign currency debt service at 4.5 percent of GDP in every year between 2027 and 2032 and closing of the external financing gap.

“While we recognise 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 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,” it said.

When considering any restructuring proposal that is made to the Bondholder Group, it shared that it is its intention to take into consideration the extent to which the economic assumptions and the adjustment efforts are consistent with these views. Recognising the critical commitments made by India in the India Letter, the Sri Lankan authorities will apply the principle of equal treatment in respect of the debt relief requested and obtained from all their remaining official bilateral creditors, it said in conclusion.