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French, UK firms selected for debt restructuring efforts 

24 May 2022

  • France’s Lazard to be financial services provider, UK’s Clifford Chance to be law firm 
  • Cabinet approves President’s proposal; Lazard to be paid $ 5.6 mn for four quarters
The Government of Sri Lanka (GoSL) has chosen the France-based financial services provider Lazard, and UK-based law firm Clifford Chance LLP, to aid in its debt restructuring efforts.  At the weekly press briefing held yesterday (24) to announce decisions taken by Cabinet, Cabinet Spokesman and Minister of Transport and Highways and Mass Media Dr. Bandula Gunawardana said that the Cabinet approved the aforementioned decision based on the Cabinet paper presented by President Gotabaya Rajapaksa at Monday’s (23) Cabinet meeting.  “Foreign exchange reserves are very low, and it is very difficult to find US dollars at the moment. Prime Minister Ranil Wickremesinghe said that in order to face this national economic crisis, special committees need to be appointed, whose decisions will be informed to the Cabinet on a weekly basis. As a first step, we have approved the proposal by Lazard to act as our financial advisor to restructure debt. We need expert technical and international knowledge for this,” said Gunawardana.  Gunawardana added that $ 5.6 million has been agreed to be paid to Lazard for their services, for four quarters.  Additionally, Clifford Chance LLP has been appointed as the expert legal advisor for the debt restructuring process.  “The Cabinet appointed a special committee to choose these experts, who considered the international proposals that were presented, and then chose these two companies,” added Gunawardana.  He also said that, as of 2021, the Government incurred a daily loss of Rs. 5.6 billion (bn) as the daily expenditure of the Government is “two-and-a-half times the income of the Government”. For the first time in its history, Sri Lanka defaulted on its foreign debt – reportedly becoming the first Asia Pacific country to do so in decades. The International Monetary Fund (IMF) began initial technical discussions with Sri Lanka on 9 May, which ended yesterday.  Sri Lanka's foreign reserves are at historic low levels, with doubts about the country’s ability to maintain a fuel, electricity, food, and medicine supply in the coming weeks. Former Finance Minister M.U.M. Ali Sabry PC stated that it will take at least six months for Sri Lanka to enter into a programme with the IMF. In the meantime, Sri Lanka has requested a Rapid Financing Instrument from the IMF. However, whether the country will receive it depends on the progress of its debt structuring.

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