Sri Lanka’s world-beating bonds pin hopes on IMF’s billions – report

Cabinet authorises Finance Ministry Secretary or SL Treasury’s Deputy Secretary to sign the Promissory Notes & other required documents as soon as Sri Lanka receives the IMF- supported Extended Fund Facility approval from the IMF Executive Board – Minister Bandula Gunawardene-

IMF Executive Board approved the Extended Fund Facility to Sri Lanka at its Board meeting today. President Ranil Wickremesinghe will make a special statement on this tomorrow – State Minister Shehan Semasinghe

President Ranil Wickremesinghe expressed his gratitude for the support of the IMF and other international partners. The IMF Executive Board approved SL’s program under the Extended Fund Facility, enabling Sri Lanka to access up to USD 7 billion in funding. The President committed to full transparency in all discussions with financial institutions & creditors, & to achieve sustainable debt levels through prudent fiscal management & an ambitious reform agenda. The IMF program is critical to achieving this vision & will help to improve SL’s standing in international capital markets, making it an attractive country for investors, talent, & tourists – PMD-

Debt Talks

Focus will turn next to the debt talks, which Fitch Ratings said may drag on for a long time as creditors debate on whether to include local-currency sovereign borrowings in the restructuring. The rating company cut its score on rupee debt in December, as it viewed a default probable.

“The prospects for a deal with creditors remain unclear for now,” said Sagarika Chandra, Hong Kong-based associate director. Fitch cited the case of Zambia, which received an IMF bailout in August and where debt restructuring talks are still ongoing.

Tellimer expects the recovery value of Sri Lanka’s bonds to be at 40 cents, with some upside possible as the nation’s debt targets imply less need for a small haircut, said Patrick Curran, a senior economist.

Sri Lanka is showing some signs of a turnaround. Reserves rebounded 29% to $2.2 billion in the four months through February, inflation is easing and daily power cuts have ended.

“IMF aid will be a relief for the country, but the road ahead is not easy,” said Ankur Shukla, an economist at Bloomberg Economics in Mumbai. “Debt restructuring could take time to complete and this will keep the country locked out of markets. It will also not be politically easy to continue with harsh reforms demanded by the IMF.”

Source – Bloomberg
-Agencies