• 1: Expert warns of renegotiating IMF programme and debt restructuring terms
• 2: Macro-linked bonds raise concerns among official creditors

Sri Lanka’s creditors would object to changing the Debt Sustainability Analysis (DSA) at the current stage as it would change the basic structure of the International Monetary Fund (IMF) programme, a global sovereign debt expert said.

In a response to an email query by The Daily Morning Business, senior fellow at the US-based independent think tank Council on Foreign Relations (CFR), Brad Setser said that DSA are revised as economic conditions change, or if there are changes in key parameters of the programme.

“Effectively that means that changing the DSA at this stage would require renegotiating the basic structure of the IMF programme,” he said.

He added that bond holders and bilateral creditors obviously would object to any changes in the debt restructuring terms.

However, he noted that there is nothing that formally precludes Sri Lanka from negotiating payment terms with its creditors that are not at the limit of what the IMF allows.

Further, he said that the Official Creditors Committee (OCC) may not have formally reached a conclusion on the macro-linked bonds and that the OCC really doesn’t have a clearly established policy on counting instruments in cases where the official creditor deal itself is a straightforward restructuring.

“There is no doubt that the macro-linked bonds provide creditors with more upside than they provide Sri Lanka with downside protection, and thus in the upside scenario provide a significantly better recovery for private creditors than official creditors,” he added.

Setser said that the official creditors need to determine if they are comfortable with the particular structure of the macro-linked bonds.