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Initial restricted discussions between SL and members of ad hoc group of bondholders concluded
The government of Sri Lanka has announced that it held restricted discussions over the past three weeks (the “Restricted Period”) with nine members of the steering committee who agreed to take part in the restricted discussions (the “Steering Committee”) of the Ad Hoc Group of Bondholders (the “Group”, and together with Sri Lanka, the “Parties”) of its International Sovereign Bonds (“ISBs”). Sri Lanka was joined by its legal and financial advisors, Clifford Chance and Lazard, respectively, and the restricted members of the Steering Committee were joined by the Group’s legal and financial advisors, White & Case and Rothschild & Co, respectively. The Steering Committee as a whole comprises ten of the largest members of the Group, with the Group controlling approximately 50% of the aggregate outstanding amount of ISBs. Despite constructive discussions, the Parties did not come to an agreement on restructuring terms. The Steering Committee did not agree to an extension of the restricted discussions upon expiration of the current Restricted Period.
During the Restricted Period, Sri Lanka, the Steering Committee and its advisors met during a two-day working session in London on 27 and 28 March 2024 (the “Meetings”) to discuss the Group’s latest debt treatment proposal, sent to Sri Lanka’s advisors on 11 March 2024 (the “Group’s March Proposal”). Prior to the meetings, on 25 March 2024, Sri Lanka had also sent, through its advisors, its own debt treatment proposal to the Group’s advisors (“Sri Lanka’s Proposal”) which was rejected by the Steering Committee. Both the Group’s March Proposal and Sri Lanka’s Proposal are attached in the Annex hereto.
Prior to the Meetings, staff at the International Monetary Fund (the “IMF”) provided their preliminary and informal assessment of both Parties’ proposals’ consistency with Sri Lanka’s IMF-supported program (the “IMF-Supported Program”) parameters and debt sustainability objectives. The IMF staff assessment included an analysis of the sum total of restructuring proposals (for official and private creditors) based on agreed deals with certain creditors and the Sri Lankan authorities’ restructuring scenario for other creditors. On that basis, the IMF staff concluded that the debt treatment scenario included in Sri Lanka’s Proposal was consistent with the IMF-Supported Program debt sustainability targets, while the scenario included in the Group’s March Proposal was not. IMF staff noted that these were preliminary assessments and the IMF staff would provide final assessments only after the Parties had reached a tentative agreement in principle.
During the Meetings, it was agreed that the primary basis for the discussions would be the Group’s March Proposal. Sri Lanka articulated the main reservations it had in relation to the Group’s proposed Macro-Linked Bond (“MLB”) – while members of the Steering Committee articulated the reasons why they believed the terms of their MLB proposal were fair and reasonable.
The Steering Committee also suggested the possible introduction of a Governance Linked Bond, which Sri Lanka said it would consider subject to being provided with more details of this proposal. Such details on the possible structure of a Governance Linked Bond were subsequently shared with Sri Lanka’s advisors on 3 April 2024.
The discussions narrowed down to four features of the MLB:
1. The baseline parameters of the instruments proposed by the Group were calibrated by reference to the Group’s “alternative baseline”, rather than Sri Lanka’s IMF-Supported Program baseline.
2. The balance of risks between Sri Lanka and holders of its ISBs – While the Group had already updated its original MLB structure to include a scenario where Sri Lanka might underperform IMF-Supported Program GDP projections, Sri Lanka invited the Group to consider a structure that would provide greater protections to Sri Lanka in such a scenario.
3. The test for triggering upward/downward adjustments in the MLB.
4. The share of additional value in an upward adjustment scenario – Sri Lanka invited the Group to consider lower bondholder allocation in the scenario in which the country outperformed IMF-Supported Program GDP projections and satisfied the upward adjustment test in the MLB.
Over the course of the Meetings, the Parties came closer to a meeting of minds on Items 1 and 2, with the Steering Committee willing to agree to Sri Lanka’s request for amendments in relation to these two key structural aspects, subject to Sri Lanka (i) agreeing to a consent fee (with the Steering Committee proposing a fee of 1.8% of the outstanding principal amount of the ISBs) with a view to offsetting the Group’s perceived reduction of the market value of their proposal as result of such amendments and (ii) agreeing with the Group’s proposal on Items 3 and 4.
Following the Meetings, on 3 April 2024, the Group shared an updated version of its debt treatment proposal (the “Group’s April Proposal”), which addressed Items 1 and 2 in the manner described above. The Group’s April Proposal is also attached in the Annex hereto. The Group’s April Proposal is yet to be assessed by the IMF staff.
While recognising the efforts made by the Group in accommodating some of its key observations, Sri Lanka reiterated its reservations regarding the structure of the MLB trigger test and the cashflows associated with the baseline and upside scenarios (Items 3 and 4).
Sri Lanka would like to thank the Steering Committee, the Group and their advisors for their constructive stance, and looks forward to continued engagement in good faith as soon as feasible, with a view to reaching common ground in the next few weeks, ahead of the second review of the IMF-Supported Program being considered by the IMF Executive Board
News
Removing monk’s robes matter for Sangha to decide: Mahanayake Theras
The Mahanayaka Theras of all Nikayas have protested against Bodu Bala Sena (BBS) General Secretary Ven. Galagodaaththe Gnanasara Thera, who is serving a prison sentence for contempt of court, being produced before court in civilian attire.
In a letter to the Commissioner General of Prisons, the Mahanayaka Theras have said they were surprised and concerned by the decision to remove the monk’s robes.
The letter has been signed by Most Ven. Thibbotuwawe Sri Siddhartha Sumangala Thera of the Malwatu Chapter, Most Ven. Warakagoda Sri Gnanarathana Thera of the Asgiri Chapter, Most Ven. Karagoda-Uyangoda Maithri Murthi Thera of the Amarapura Maha Nikaya and Most Ven. Makulawe Sri Wimala Thera of the Ramanna Maha Nikaya.
The Mahanayaka Theras have said they respect the Constitution and the judicial process, but maintained that removing a monk’s robes or ending his status as a member of the Buddhist Order is a matter that should be decided by the Maha Sangha.
They have said the relevant Sangha Council has not determined that Ven. Gnanasara Thera committed a Parajika offence or any other offence warranting his removal from the Buddhist Order.
The Mahanayaka Theras have also referred to Regulation 550 of the Prison Standing Orders, which they say stipulates that convicted prisoners should not be taken to court in prison uniform and should be allowed to wear the type of clothing they normally wore before their conviction. In the case of a Buddhist monk, they have said, this means his monastic robes.
They also referred to the United Nations Standard Minimum Rules for the Treatment of Prisoners, which provide for prisoners taken outside prison to be allowed to wear their own clothing or other unobtrusive clothing.
The Mahanayaka Theras have requested the Commissioner General of Prisons to allow Ven. Gnanasara Thera to wear his robes when appearing in court and to maintain his status as a monk while he remains in prison.
Prisons authorities have said that the clothing decision was made under prison regulations, and the Prisons Department has stated that prisoners serving sentences of more than three years are required to wear prison-issued clothing when produced before court.
News
NDB fraud Rs 60mn more than reported
The Committee on Public Finance has said that the actual losses suffered by the NDB bank are much more than what was initially reported. When compared with the initial disclosure made by NDB on 6 April 2026, the reported amount of the fraud had increased by Rs. 0.4 billion, from Rs. 13.2 billion to Rs. 13.6 billion, the committee said.
When compared with the amount disclosed by NDB on 26 June 2026, based on the interim report dated 22 June 2026, the additional amount of fraud is Rs. 60 million.
The has committee issued the following statement: The Committee on Public Finance recently summoned officials of the Central Bank of Sri Lanka to Parliament to inquire into the financial irregularities identified at NDB Bank and the final audit report relating to the matter.
The Committee meeting, chaired by Member of Parliament Dr. Harsha de Silva, discussed irregularities identified in NDB Bank’s financial statements, shortcomings in the audit process, and the relevant audit reports.
The meeting was attended by Deputy Ministers Chathuranga Abeysinghe, Dr. Kaushalya Ariyaratne, and Nishantha Jayaweera, as well as Members of Parliament Attorney-at-Law Rauff Hakeem, Ravi Karunanayake, Ajith Agalakada, Nimal Palihena, Wijesiri Basnayake, M.K.M. Aslam, Champika Hettiarachchi, and Attorney-at-Law Lakmali Hemachandra.
The Committee also focused on the findings of the investigation conducted by the Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAAMB), as well as the findings revealed through the investigation conducted by Deloitte Touche Tohmatsu India LLP. In particular, the Committee inquired into the failure of the external auditors to identify irregularities in NDB Bank’s financial statements.
The accountability of senior management with regard to corporate governance and risk management in relation to the financial irregularities was also discussed.
As a significant proportion of NDB Bank’s shares are held by institutions representing public and state funds, the Committee also considered the potential impact of such financial irregularities on public funds and the general public.
The Committee also discussed the progress made by LankaPay in establishing a centralized fraud monitoring system to prevent fraud within the financial system. The need to strengthen fraud monitoring systems at the individual bank level to monitor transactions carried out within each bank was also emphasized.
Accordingly, the following observations are included in the final audit report concerning the financial irregularities at NDB Bank:
1. The audit covers the period from 1 April 2016 to 31 March 2026. The audit report specifically identifies the financial impact arising from fraudulent transactions amounting to Rs. 13,639,664,684 (Rs. 13.6 billion).
2. According to the disclosure made on 29 September 2026, the financial impact arising from the fraudulent transactions is as follows:
· Rs. 1.5 billion for the period prior to 1 January 2025;
· Rs. 9.6 billion during 2025; and
· Rs. 2.5 billion for the quarter ended 31 March 2026.
3. Compared with the initial disclosure made by NDB on 6 April 2026, the reported amount of the fraud has increased by Rs. 0.4 billion, from Rs. 13.2 billion to Rs. 13.6 billion. Compared with the amount disclosed by NDB on 26 June 2026, based on the interim report dated 22 June 2026, the additional amount of fraud is Rs. 60 million.
4. The final audit report has also confirmed the previous disclosures that no customer accounts were affected as a result of the fraud incident.
5. The report has identified several governance failures at NDB relating to the processing of CEFT transactions, user-level activities within the Core Banking System, and the management of user credentials and access information. In addition, shortcomings have been identified in several operational areas, including transaction monitoring, daily account reconciliation, financial compliance, internal audit, branch network management, and operational risk management.
The audit report has made comprehensive recommendations to strengthen the control mechanisms, governance structures, and processes relating to the above-mentioned activities of the bank.
News
President orders review of laws on treatment of imprisoned monks
President Anura Kumara Dissanayake has ordered the formation of a committee to review the laws and regulations on how Buddhist monks serving prison sentences are treated, including the procedures that apply when they are taken out of prison.
He revealed this at a special meeting with Maha Sangha representatives held yesterday (8) at the Presidential Secretariat. The meeting was called after concerns were raised over how Ven. Galagoda Aththe Gnanasara Thera was treated when he was taken from prison to court.
The committee will recommend amendments to existing laws and, where needed, new prison standing orders and regulations. Its members will be drawn from the Attorney General’s Department, the Ministries of Justice, Public Administration, and Buddha Sasana, Religious and Cultural Affairs, and the Department of Prisons, including the Commissioner General of Prisons. It has been given two weeks to review the current legal provisions and submit its recommendations. The President added that any changes specific to Buddhist monks would be made in consultation with the Maha Sangha.
Outlining the legal background, the President said prison administration was governed by the Prisons Ordinance of 1877, along with the regulations and standing orders issued under it. That framework mostly addressed prisoners in general, he said, and had few provisions dealing specifically with Buddhist monks.
The meeting was attended by senior Maha Sangha members representing the Siyam, Amarapura and Ramanna Nikayas, along with Minister of Buddhasasana, Religious and Cultural Affairs Hiniduma Sunil Senevi and Minister of Justice Harshana Nanayakkara.
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