(NewsRadio); Holders of Sri Lanka’s foreign bonds reportedly want more clarity on the nation’s local-currency debt before they sit down for formal restructuring talks.
According to a report by Bloomberg, creditors are concerned that managing Sri Lanka’s local debt pile will prove costly, which could reduce payments earmarked for foreign bondholders or even trigger another restructuring effort down the road.
The government has indicated it seeks to restructure its Eurobonds while repaying its local-currency obligations in full.
Quoting people familiar with the development, Bloomberg report said some bondholders are recommending Sri Lanka follows in Ghana’s footsteps to help its stalled restructuring efforts.
The African country has offered a debt swap plan for local securities in addition to its Eurobond negotiations.
Sri Lanka defaulted on its dollar debt in May last year, and must clinch good-faith negotiations with private bondholders and debt assurances from bilateral creditors including China, Japan and India, to get the International Monetary Fund’s nod for a $2.9 billion loan.
Local bonds make up about half of the central government’s $70 billion debt pile, according to data from the Finance Ministry and the central bank.
Meanwhile, Governor of the Central Bank Nandalal Weerasinghe said last week that the country will hold detailed talks on domestic debt treatment only after the IMF loan has been approved.
With inputs from Bloomberg
