On the 19th of September 2024, Sri Lanka announced that it has reached Agreements in Principle on the restructuring of approximately USD$ 17.5 billion of external commercial debt (as of end 2023).

These agreements have been reached with holders of its International Sovereign Bonds, following negotiations with the Ad Hoc Group of Bondholders (“AHGB”), a representative group of international investors, and the Local Consortium of Sri Lanka (“LCSL”), a representative group of domestic financial institutions. Collectively, the two groups hold in excess of 50% of the Bonds.

Under the agreements, holders of the Bonds will be consenting to a present value concession of 40.3% in the baseline scenario, calculated with a discount factor of 11%. The agreements provide Sri Lanka with enhanced debt relief compared to the Joint Working Framework agreed in July 2024, including a further reduction in interest payments provided in the new agreement.

Sri Lanka also announced that it has finalized agreement in principle with China Development Bank (“CDB”) on the key financial terms of the restructuring of approximately US$ 3.3bn of sovereign debt.

As a result of the agreements already achieved with Eximbank of China and members of Sri Lanka’s Official Creditor Committee (“OCC”) as well as CDB and bondholders, Sri Lanka will have obtained over USD 17bn of debt service relief during the IMF program period (around USD 2.4bn from Eximbank of China, USD 2.9bn from the OCC, USD 2.5bn from CDB and USD 9.5bn from the bondholders).

His Excellency the President expressed his deep appreciation for all of Sri Lanka’s creditors who engaged in good faith throughout this process, and also for the International Monetary Fund and the OCC Secretariat for the continuous and constructive support.

The official announcement is available at: https://links.sgx.com/FileOpen/Sri%20Lanka%20%20Announcement%20of%20Agreement%20in%20Principle%20-%2019_09_2024.ashx?App=Announcement&FileID=819175

The Central Bank repaid $522 million in 2023

By Sanath Nanayakkare

It is incorrect to claim that Sri Lanka is not repaying its foreign debt, the Ministry of Finance states on its official website in a document dated Sep 16, 2024.

Sri Lanka’s government and private borrowers serviced $2.58 billion in debt in 2023, following $2.48 billion in 2022 – the year the country defaulted on external debt – according to the report.

The report highlights that the Central Bank repaid $522 million in 2023, including $172 million to the IMF and $350 million in swaps.

Further clarifying the concerns in some quarters that foreign debt is not being repaid, the Ministry points out that, by 2023, the government made $1.043 billion in principal repayments and $405 million in interest payments.

“In 2022, central government principal repayments dropped to $1.236 billion from $2.377 billion in 2021 after the default, with interest payments falling from $1.187 billion to $465 million,” it states.

“Meanwhile, in the private sector, banks and corporations repaid $769 million in principal in 2022, down from $1.410 billion in 2021, while interest payments dropped from $394 million to $273 million.”

“In 2023, private entities paid $405 million in interest. The data excludes foreign reserve collections by both the central bank and private banks, which resemble debt repayments. Reduced imports of building materials and machinery were linked to domestic savings being used to repay debt instead of being invested locally,” the report states.

At the World Summit International Federation of Purchasing and Supply Management (IFPSM) held in Cancún, Mexico, Jayantha Gallehewa, Hony. President of the Institute of Supply and Materials Management (ISMM) in Sri Lanka, was honored with the esteemed IFPSM President’s Award for 2024. This prestigious accolade recognizes his exceptional contributions to raising the standards of Sri Lanka’s Supply Chain Industry, as well as his significant efforts to advance the sector on a global scale. Remarkably, “Mr. Gallehewa is the only Sri Lankan to have received this prestigious award and the third Asian professional to ever win this honorable award within the last 10 years”.