SL downs in a whirlpool till 2028 after debt restructure: Global Analyst

By: Staff Writer

February 25, Colombo (LNW): Sri Lanka will face difficulties till 2027-28 in order to gain international market access due to high debt despite its post debt restructuring phase according to the Debt Sustainability Analysis (DSA) targets, a global sovereign debt expert said.

Speaking at the Committee on Public Finance (COPF) on Tuesday (20), Global Sovereign Advisory Research Analyst Theo Maret said that the International Monetary Fund (IMF) has used a different model to assess the DSA of Sri Lanka than it has used for low-income countries, providing higher DSA targets for Sri Lanka.

“The IMF used Sri Lanka the same model that applies to Japan, the US, France with a strong revenue base and these countries are able to sustain a higher debt than what Sri Lanka can reasonably sustain,” he said.

Maret said that this was due to the fact that Sri Lanka has graduated in the past as a middle-income country. Sri Lanka was downgraded to the low-income level in 2022.

Sri Lanka sent a new restructuring proposal to dollar bondholders through its adviser Lazard as the South Asian nation seeks to complete overhauling its defaulted debt, according to people familiar with the matter.

A counter proposal to a bondholder group’s offer in October for a 20% haircut and the issuance of macro-linked bonds was conveyed through Lazard, the people said, declining to be named because negotiations are private.

They did not elaborate on the details of the offer. Government representatives may travel to London soon to meet Sri Lanka’s commercial creditors, one of the people said.

Completing the overhaul of Sri Lanka’s $ 27 billion of foreign debt is critical to ensure financing from the International Monetary Fund bailout keeps flowing. President Ranil Wickremesinghe said this month that authorities expect to complete the restructuring within the first …read more

Source:: LNW English