President Ranil Wickremesinghe

Treasury Secretary Mahinda Siriwardena

• Sri Lanka reaches agreement with Official Creditor Committee on treatment of $ 5.9 b outstanding debt
• Agreement in principle consists of a mix of long-term maturity extension and reduction in interest rates
• Deal will facilitate swift approval by IMF Executive Board of the First Review of Sri EFF program allowing for next tranche of financing of about $ 334 million to be disbursed
• OCC expects other bilateral creditors to consent to sharing, in a transparent manner, information necessary for the OCC to evaluate comparability of treatment regarding their own bilateral agreement
• Expects SL will continue to engage with private creditors to find as soon as possible an agreement on terms at least as favourable as the terms offered by OCC
• SL reaffirms commitment to transparency, comparable treatment of all participating external creditors, and full compliance with the debt sustainability targets under the IMF-supported program
• Similar deal in the offing with Sri Lanka’s remaining official bilateral creditors including Saudi Arabia, Pakistan, Kuwait and Iran, altogether representing a further $ 274 m million of outstanding claims
• Comparable debt restructuring agreements with external commercial creditors, and in particular with its holders of international sovereign bonds pending
• Govt. invites bondholders to accelerate discussions with a view to coming to a mutually acceptable agreement as promptly as possible

Sri Lanka’s External Debt Restructuring (EDR) yesterday achieved what the Government described as a “landmark step” with an agreement reached in principle with the Official Creditor Committee on treatment of debt worth $ 5.9 billion.

The agreement in principle consists of a mix of long-term maturity extension and reduction in interest rates, the Finance Ministry said.

“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 their 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 in a statement.

Official Creditor Committee (OCC) is co-chaired by India, Japan and France (as chair of the Paris Club). The committee includes India and Hungary in addition to Paris Club creditors.

The Finance Ministry statement said that the Lankan Government commends the support and cooperation of OCC members in reaching this agreement, which demonstrates a mutual commitment to restoring public debt sustainability in line with the International Monetary Fund (IMF) program targets. The agreement will facilitate a swift approval by the IMF Executive Board of the First Review of Sri Lanka’s IMF-supported program, allowing for the next tranche of IMF financing of about $ 334 million to be disbursed.

The agreed-upon debt treatment terms will be further detailed and formalised 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,” the Finance Ministry said.

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 finalising similar agreements with Sri Lanka’s remaining official bilateral creditors, including Saudi Arabia, Pakistan, Kuwait and Iran, altogether representing a further $ 274 million of outstanding claims.

The Finance Ministry said Sri Lanka now intends to focus its efforts on reaching comparable debt restructuring agreements with external commercial creditors, and 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 Finance Ministry said.

“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 program,” the statement added.

Separately, the OCC said it commends the Sri Lankan authorities for their continuous efforts in implementing the reforms necessary for their country’s return to a sustainable path.

The OCC stands ready and looks forward to formalising this agreement in the coming weeks in a Memorandum of Understanding with the Sri Lankan authorities. The OCC expects other bilateral creditors to consent to sharing, in a transparent manner, the information necessary for the OCC to evaluate comparability of treatment regarding their own bilateral agreement. The OCC also expects that the Sri Lankan authorities will continue to engage with their private creditors to find as soon as possible an agreement on terms at least as favourable as the terms offered by the OCC.

“These engagements will ensure that the overall debt treatment granted to Sri Lanka is consistent with the IMF program parameters,” OCC added.