Agreement reached in principle with Official Creditor Committee

The government yesterday announced that it had reached an agreement in principle with its Official Creditor Committee (OCC) on the financial terms of a debt treatment.

Issuing a press release the Ministry of Finance, Economic Stabilization and National Policies said the agreement in principle covers approximately 5.9 billion U.S. dollars of outstanding public debt and consists in a mix of long-term maturity extension and reduction in interest rates.

The agreement will facilitate a swift approval by the IMF Executive Board of the First Review of Sri Lanka’s IMF-supported programme, allowing for the next tranche of IMF financing of about US$ 334 million to be disbursed, the ministry said.

The agreed-upon debt treatment terms will be further’ detailed and formalized in a Memorandum of Understanding between Sri Lanka and the OCC, which will then be implemented through bilateral agreements with each OCC member, in accordance with their laws and regulations. The Sri Lankan Government looks forward to a prompt implementation of the agreed terms.

“This agreement marks a landmark step for Sri Lanka. We extend our sincerest thanks to the OCC and its co-chairs, Japan, India and France, for the unwavering support in resolving our country’s public debt situation. This agreement serves as a key milestone in Sri Lanka’s ongoing endeavour to achieve public debt sustainability and to foster economic recovery,” Secretary to the Treasury K M Mahinda Siriwardana said.

Given below is the press release : “This agreement in principle, together with the agreement in principle reached last month with China Eximbank, goes a long way in dealing with Sri Lanka’s external bilateral debt restructuring. The next steps will include finalizing similar agreements with our remaining official bilateral creditors, including Saudi Arabia, Pakistan, Kuwait and Iran, altogether representing a further US$ 274 million of outstanding claims.

“Sri Lanka now intends to focus its efforts on reaching comparable debt restructuring agreements with external commercial creditors, mid in particular with its holders of international sovereign bonds. Good faith engagement is still ongoing in that regard, and the authorities would like to invite its bondholders to now accelerate the discussions with a view to coming to a mutually acceptable agreement as promptly as possible.

The authorities would like to reaffirm their commitment to transparency, comparable treatment of all participating external creditors, and full compliance with the debt sustainability targets under the IMF-supported programme.”