Government to unveil domestic debt restructuring strategy this week

Debt-laden Sri Lanka will unveil its domestic debt restructuring strategy this week, central bank chief P Nandalal Weerasinghe said on Sunday (Jun 25), as the island navigates its worst financial crisis in decades.

Sri Lanka will also likely obtain Cabinet and parliamentary approval for the debt restructuring strategy this week, Weerasinghe told local TV channels in a special statement.

The government on Friday declared a special bank holiday which would last from Jun 29 to Jul 3 to protect against any market turbulence following the domestic debt rework announcement, local TV channel Ada Derana reported. The exact date of the domestic debt restructuring is yet to be officially announced.

“Continuously, during the dates the debt market and the economy market should not function because their information is very market sensitive … If those proposals are discussed in public, those sensitive markets are not functioning,” Weerasinghe said.

Sri Lanka’s economy was engulfed in its worst financial crisis in more than seven decades last year after its foreign exchange reserves dropped to record lows.

The island defaulted on its foreign debt for the first time in history in May 2022 and kicked off talks with key creditors including bondholders as well as China, Japan and India last September to restructure its debt.

Sri Lanka is working to finalise its debt restructuring talks by September to meet the first review done by the International Monetary Fund (IMF) as part of a US$2.9 billion bailout, which has helped its economy recover in recent months. (Reuters)