Sri Lanka could complete debt restructuring by June - Coomaraswamy - Breaking News

Sri Lanka could complete debt restructuring by June - Coomaraswamy

10 April 2023 04:01 am 0 Bookmark

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“...by the end of June, both domestic and external debt will be restructured and there will be an agreement across the board on how that is done” – Coomaraswamy
Says Central Bank balance sheet restructuring won’t have implications to broader economy
Says for the bond restructuring to be effective there has to be a wider participation in the restructuring process by domestic bond holders

Underscoring what the Central Bank Governor Dr. Nandalal Weerasinghe said on an early finish to the debt

Dr. Indrajith Coomaraswamy

restructuring, the former Central Bank Governor and economist Dr. Indrajith Coomaraswamy said Sri Lanka could wrap-up its debt restructuring talks by end June, three months before the first International Monetary Fund (IMF) programme review comes up in September.

Speaking at a podcast conducted by NDB Securities last week, the former Governor expressed confidence that the parties would be able to come to a broader agreement on how both domestic and foreign debt is restructured.

“Hopefully by the end of June, both the domestic and external debt will be restructured and there will be an agreement across the board on how that is done,” Dr. Coomaraswamy said.

On domestic debt restructuring, the Central Bank reiterated that they wouldn’t agree on anything which would destabilise the local banking system.

In an investor presentation made a week ago the Central Bank said the Treasury bills held by it would be subjected to restructuring and the bonds would be restructured on a voluntary basis.

The Central Bank holds little over 60 percent of the total outstanding Treasury bill stock.

Dr. Coomaraswamy said such a process wouldn’t have any negative implications on either the Central Bank balance sheet or the broader economy.

“I don’t think there would be any systemic consequences of that development. I see no problem of taking this course of action”, he added.

However, he said that could entail the Treasury bills held by the Central Bank being converted into long term bonds.

He further said that for the bond restructuring to be effective there has to be a wider participation in the restructuring process by the domestic bond holders as it is voluntary. Therefore, the government may have to provide some incentives for the bond holders to take part.

Sri Lanka’s economy is now on a path to recovery, earlier than most pundits predicted and Bloomberg Economics last week forecasted the Sri Lankan economy to register a growth of about 2.0 percent for 2023 as tourism is on course for faster recovery and the country is growing from an extremely lower base last year.

<ul> <li style="text-align: justify;">“...by the end of June, both domestic and external debt will be restructured and there will be an agreement across the board on how that is done” – Coomaraswamy</li> <li style="text-align: justify;">Says Central Bank balance sheet restructuring won’t have implications to broader economy </li> <li style="text-align: justify;">Says for the bond restructuring to be effective there has to be a wider participation in the restructuring process by domestic bond holders</li> </ul> Underscoring what the Central Bank Governor Dr. Nandalal Weerasinghe said on an early finish to the debt <table align="right" border="0" cellpadding="1" cellspacing="1" style="width:180px;"> <tbody> <tr> <td> <img src="https://bmkltsly13vb.compat.objectstorage.ap-singapore-1.oraclecloud.com/cdn.sg.dailymirror.lk/assets/uploads/image_6713404ca0.jpg" style="width: 180px; height: 269px;" /> Dr. Indrajith Coomaraswamy<center><a href="https://www.hi.lk/himag" target="_blank"><img src="https://bmkltsly13vb.compat.objectstorage.ap-singapore-1.oraclecloud.com/cdn.sg.dailymirror.lk/assets/uploads/advr_7fec3b236e.jpg" /></a></center> </td> </tr> </tbody> </table> restructuring, the former Central Bank Governor and economist Dr. Indrajith Coomaraswamy said Sri Lanka could wrap-up its debt restructuring talks by end June, three months before the first International Monetary Fund (IMF) programme review comes up in September.  Speaking at a podcast conducted by NDB Securities last week, the former Governor expressed confidence that the parties would be able to come to a broader agreement on how both domestic and foreign debt is restructured.  “Hopefully by the end of June, both the domestic and external debt will be restructured and there will be an agreement across the board on how that is done,” Dr. Coomaraswamy said. On domestic debt restructuring, the Central Bank reiterated that they wouldn’t agree on anything which would destabilise the local banking system.  In an investor presentation made a week ago the Central Bank said the Treasury bills held by it would be subjected to restructuring and the bonds would be restructured on a voluntary basis.  The Central Bank holds little over 60 percent of the total outstanding Treasury bill stock.  Dr. Coomaraswamy said such a process wouldn’t have any negative implications on either the Central Bank balance sheet or the broader economy.  “I don’t think there would be any systemic consequences of that development. I see no problem of taking this course of action”, he added.  However, he said that could entail the Treasury bills held by the Central Bank being converted into long term bonds.  He further said that for the bond restructuring to be effective there has to be a wider participation in the restructuring process by the domestic bond holders as it is voluntary. Therefore, the government may have to provide some incentives for the bond holders to take part.  Sri Lanka’s economy is now on a path to recovery, earlier than most pundits predicted and Bloomberg Economics last week forecasted the Sri Lankan economy to register a growth of about 2.0 percent for 2023 as tourism is on course for faster recovery and the country is growing from an extremely lower base last year.