Sri Lanka expects to finalise domestic debt rework by May
Government sees talks with overseas creditors done by Sept
Local currency debt rework to include only cenbank T-Bills
Debt operation for $24 billion of T-Bonds to be voluntary
Adds details of the presentation to creditors
By Jorgelina do Rosario and Uditha Jayasinghe
LONDON/COLOMBO, March 30 (Reuters) -Sri Lanka will kick off a reworking of part of its domestic debt next month and aims to finalise it by May, central bank and treasury officials told creditors during a virtual presentation on Thursday.
The financially strapped South Asiancountry will also start formal negotiations for the debt it owes to bilateral creditors and overseasbondholders after the domestic debt operation, aiming to complete those parallel debt talks by September.
Central bank and treasury officials said they expected that "exploring options for a domestic debt operation" will help achieve much-needed liquidity relief, including both local currency T-Bills and T-Bonds.
Government officials told investors that only T-Bills held by the central bank would be considered for a debt rework, while a voluntary domestic debt operation was expected for the holders of $24 billion ofT-Bonds. Sri Lanka's total local currency debt is equivalent to $36.6 billion, according to the presentation.
The Indian Ocean island nation of 22 million people owes international bondholders over $12 billion, while external debt with bilateral creditors such as the Paris Club, China and India totals $7.1 billion.
"The government will engage with all T-bills and T-bonds holders," Central Bank Governor P. Nandalal Weerasinghe said.
TreasurySecretary Mahinda Siriwardena also participated in the presentation, along with representatives of financial and legal advisers Lazard and Clifford Chance.
Sri Lanka is struggling with its worst economic crisis in more than seven decades. It has led to shortages of essentials and the ouster of a president.
EYES ON 'QUALITY' OF SPENDING
The International Monetary Fund's executive approved in March a nearly $3 billion bailout for Sri Lanka that is expected to catalyse additional support from other multilateral lenders.
To that end, Sri Lanka has already frozen public recruitment and has hiked taxes and power tariffs by 66% this year. It will continue to restrict government spending to keep public finances on an even keel and meet primary balance targets outlined by the IMF, Siriwardena told creditors during the online presentation.
Siriwardena added that the country will start looking at ways to improve the quality of its expenditures .
"The most important aspect of this will be tax policy - we see huge potential to increase the tax base and also revenue. On the expenditure side we are also looking to improve the quality of expenditure and extend more to areas like healthcare."
Weerasinghe said the economy could perform better that the 3% GDP contraction the IMF forecasts for 2023, though he provided no other projections for the period.
He added that the tourism sector, a significant source of revenue, is rapidly reviving though "still hasn't reach pre-COVID levels (seen) in 2019. However, we hope for a strong recovery in tourism next year".
Reporting by Jorgelina do Rosario and Uditha Jayasinghe; editing by Jonathan Oatis and Mark Heinrich
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.