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Government awaits debt restructuring firms’ advice to deal with China 

31 Jul 2022

  • IMF urges Sri Lanka to restructure Chinese debt
By Imsha Iqbal  With the International Monetary Fund (IMF) urging Sri Lanka to commence discussions on restructuring its debt with bilateral lender China, the Treasury states that the Government of Sri Lanka (GoSL) is awaiting advice from its legal and financial advisors to do so.   Speaking to The Sunday Morning Business, a senior Treasury official said that this would depend on the advisors devising possible strategies as it was only then that Sri Lanka could engage with its creditors.  The senior official noted that the Government had already appointed financial and legal advisors for the purpose of debt restructuring who were seeking various options for the Government to adapt. Their duty is to study the situation and the debt profile.  In June, representatives from Lazard Ltd. and Clifford Chance LLP – the international legal and financial advisory firms based in France and the UK respectively – arrived in the country following the approval of the Attorney General’s Department. The senior official added: “Once Lazard and Clifford Chance provide their recommendations, the Government will engage with all creditors in a transparent manner and equal treatment basis.” On Tuesday (26), in an interview with Reuters, IMF Asia and Pacific Department Director Krishna Srinivasan said: “China is a big creditor and Sri Lanka has to engage proactively with it on debt restructuring.” Sri Lanka owes Beijing alone approximately $ 6.5 billion in financing including development bank loans and a swap, as per statistics of the Institute of International Finance (IFF). When The Sunday Morning Business inquired whether the GoSL had commenced debt restructuring discussions with China, the senior Treasury official responded: “We have not specifically started such discussions [with China], but we have regular discussions with all lending parties.”  The official further said that the IMF had already instructed that debt restructuring was needed as the country’s debt was not sustainable.  IMF Sri Lanka Mission Chief Masahiro Nozaki said this April that an IMF-supported programme was needed to resolve Sri Lanka’s acute balance of payments issue, which could put its economy back on a “sustainable” growth path as early as possible. In last Tuesday’s interview with Reuters, Srinivasan also noted: “Sri Lanka has to engage with its creditors – both private and official bilateral – on a debt workout to ensure debt sustainability is restored.”   


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