Defaulted Bond Discussions to Begin

Defaulted Bond Discussions to Begin

Negotiations to Begin: Global investors and Sri Lankan officials are gearing up to commence negotiations aimed at restructuring $12 billion in defaulted global bonds next week, reported Bloomberg .

Steering Committee Involvement: A steering committee, comprising bondholders, will lead the talks and consider the government’s proposal to rework the overseas debt that has been in default since 2022.

Importance of Timely Deal: There’s a sense of urgency to expedite a deal, especially with Sri Lanka’s upcoming presidential elections later this year.

Government’s Debt Restructuring Proposal: Sri Lanka shared a fresh debt restructuring proposal with private creditors in mid-February, indicating its commitment to resolving the debt crisis.

Economic Recovery Prospects: Sri Lanka aims to attract approximately $5 billion in foreign funds over the next two years once the restructuring of its overseas debt is finalized, signalling optimism for economic recovery.



Background on Default: Sri Lanka defaulted on its debt in May 2022 due to a severe shortage of foreign exchange reserves, triggering the country’s worst financial crisis since gaining independence from Britain in 1948.

IMF Bailout and Economic Performance: In March last year, Sri Lanka secured a $2.9 billion bailout from the International Monetary Fund (IMF), which helped to stabilize inflation, increase state revenue, and rebuild foreign exchange reserves. Despite challenges, Sri Lanka’s economy shrank by 2.3% last year, outperforming IMF’s initial expectations of a 3.6% contraction.

These key points provide a snapshot of the ongoing debt restructuring efforts in Sri Lanka and their implications for the country’s economic future

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