Connect with us

Hi, what are you looking for?

Right Decision NowRight Decision Now

World News

Sri Lanka asks dollar debt holders for 30% haircut

COLOMBO — Sri Lanka is asking foreign investors in its international sovereign bonds to take a 30% haircut and is seeking similar concessions from holders of its other dollar-denominated bonds as it seeks to restructure its massive debt, its central bank governor said on Thursday.

The government will also exchange treasury bills into long-term bonds as part of a domestic debt restructuring program, Nandalal Weerasinghe told a press conference as he unveiled details of the long-awaited plan, which will cover part of the island nation’s $42 billion domestic debt.

Sri Lanka is struggling with its worst financial crisis since its independence from Britain in 1948 after the country’s foreign exchange reserves hit record lows and triggered its first foreign debt default last year.

Pledging to put its mammoth debt burden on a sustainable track, Sri Lanka locked down a $2.9 billion bailout from the International Monetary Fund (IMF) in March. The domestic restructuring is needed to help the country reach the IMF program goal of reducing overall debt to 95% of gross domestic product by 2032.

Meanwhile, the government is also pushing forward with reworking its foreign debt with bondholders and bilateral creditors including China, Japan and India.

Under the domestic debt revamp, holders of locally issued dollar-denominated bonds such as Sri Lanka Development Bonds(SLDBs) will be given three options, Mr. Weerasinghe said.

The first would be treatment similar to investors in the country’s international sovereign bonds — a 30% principal haircut with a 6-year maturity at a 4% interest rate, he said.

“We are asking foreign debt holders for a 30% haircut but that is still under discussion,” Mr. Weerasinghe said. Sri Lanka currently has $12.5 billion in international sovereign bonds.

Mr. Weerasinghe would not comment on current talks with bilateral creditors. Sri Lanka has set a goal of finalizing debt restructuring talks by September to align with the first review of its IMF programme.

China wants multilateral lenders like the International Monetary Fund (IMF) and World Bank to absorb some of the losses, which those institutions and many developed nations, notably the United States, are resisting.

The domestic restructuring program will be presented to parliament on Saturday for approval.

Earlier on Thursday, the World Bank approved $700 million in budgetary and welfare support for the country, the biggest funding tranche for the island nation since the IMF deal in March. About $500 million of the funds will be allocated for budgetary support while the remaining $200 million will be for welfare support earmarked for those worst hit by the crisis.

Sri Lanka’s cabinet approved the domestic debt program at a special cabinet meeting on Wednesday, a source at the president’s office told Reuters.

Domestic bondholders will be given two other options:

• Similar treatment to that being proposed to bilateral dollar creditors: No principal haircut, with a 15-year maturity and 9-year grace period at 1.5% interest rate.

• Exchange their holdings for local currency denominated instruments: No principal haircut with a 10-year maturity at the SLFR (Sri Lanka Standing Lending Facility Rate) + 1% interest rate.

Local currency bonds held by superannuation funds, including pension funds, will be replaced with new bonds which will have 9% interest, Mr. Weerasinghe added.

But banks’ local currency bonds have been excluded from the scheme to avoid putting further strain on the financial sector. — Reuters

    You May Also Like


    The head of the International Monetary Fund has warned of increased risks to the stability of the financial system after weeks of banking sector...


    The Home Office has made next to no progress in tackling criminal fraud during the past five years, despite it having become Britain’s most...


    1.22 billion people use Instagram every month. That’s a huge number of Instagrammers trying to hit it big on the platform all at the...


    Mark Zuckerberg has laid off more than 11,000 Meta’s employees, about 13 per cent of its global workforce, in what he described as “some...

    Disclaimer:, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 | All Rights Reserved