Global financial advisory firm Lazard Ltd. has commenced talks with India, Japan and China to restructure Sri Lanka’s foreign debt, a government spokesperson told reporters in Colombo on Tuesday.
According to Reuters, acting cabinet spokesperson Ramesh Pathirana said that the talks are aimed at seeking a “consensus” among Sri Lanka’s three main creditors. India, China and Japan are Colombo’s biggest bilateral lenders, with total loans valued around $13 billion.
Under the $2.9 billion bailout deal between Sri Lanka and the International Monetary Fund (IMF) on September 1, Colombo should receive adequate “financing assurances” from foreign creditors who must agree to restructure their respective debt to the country.
Sri Lanka’s overall foreign debt is estimated to be between $85 and $100 billion, with billions of dollars also owed to western bondholders.
The country announced a default on its foreign debt in April after suffering a worsening balance-of-payments crisis caused by depleting foreign exchange reserves. The country almost ran out of fuel, medicine and other essentials and had to rely on emergency imports from other countries. Inflation touched a record high of 60 per cent, with the World Food Programme (WFP) warning of spreading hunger caused by economic hardship.
Previously, Japan stated that it was willing to chair a conference of Sri Lanka’s foreign creditors should Beijing, which is Colombo’s biggest bilateral lender, agree to send a representative.
Delhi, for its part, has also assured Colombo of all possible cooperation in dealing with the economic crisis. India is also playing a part in lobbying the IMF to approve Colombo’s bailout package before this month’s deal.
India has also emerged as one of the biggest bilateral lenders to Sri Lanka this year, with its total assistance amounting to close to $4 billion.
Beijing, however, has so far remained non-committal in restructuring its bilateral debt to Sri Lanka, despite a request by former President Gotabaya Rajapaksa to Chinese Foreign Minister Wang Yi when the latter was in Colombo in February.
New Sri Lankan President Wickremesinghe likewise said in a media interview on August 26 that he had also informed Beijing about the “need to restructure the debt” and urged greater coordination among all the foreign creditors.