GSDR observes Sri Lanka's Euro-bond restructuring

Marrakech (News 1st);  The Global Sovereign Debt Roundtable notes that the work continues toward reaching an agreement in principle with official creditors on specific restructuring terms, for Sri Lanka.

The Global Sovereign Debt Roundtable (GSDR) reviewed progress in reaching common understanding on ways to address key impediments to efficient debt restructuring, on Thursday (12).

The IMF said that the GSDR discussed the priority areas for the work going forward. 

According to the GSDR Co-chairs Progress Report released at the end of the meeting, significant progress has also been made in actual debt restructuring cases, including Sri Lanka.

However, the time period taken for the programs is still beyond the 2-3 months that were observed in the past.

"There has been a landmark agreement in June between Zambia and their official bilateral creditors, and continued progress in the discussion of other cases. More broadly, the past 6 months have seen a positive momentum, with somewhat shorter timelines and somewhat smoother processes. It took 11 months for Chad in 2021 to move from the staff-level agreement for an IMF program to the actual approval of the program by the IMF Executive Board; 9 months for Zambia in 2022; 6 months for Sri Lanka in March 2023; and 5 months for Ghana in May 2023. This is still beyond the 2-3 months that were observed in the past," said the report.

The report added that for Sri Lanka, the financing assurances provided by an ad hoc committee of official creditors (comprising the Paris Club and India, and co-chaired by France, Japan and India) and China, enabled the approval of the Fund supported program in March 2023. 

Since then, the work continues toward reaching an agreement in principle with official creditors on specific restructuring terms, it added.  

In parallel, the authorities have concluded the restructuring of some of the domestic debt and are in active negotiations with Eurobond holders on a restructuring plan, said the report.

The GSDR progress report was released by the International Monetary Fund Managing Director Kristalina Georgieva, World Bank President Ajay Banga and Finance Minister of India, Nirmala Sitharaman, co-chairs of the GSDR.

What is the GSDR?

The objective of the Global Sovereign Debt Roundtable is to build greater common understanding among key stakeholders involved in debt restructurings, and work together on the current shortcomings in debt restructuring processes, both within and outside the Common Framework, and ways to address them.

Who participates in the GSDR?

The roundtable is co-chaired by the IMF, World Bank and India (G20 Presidency) and comprises official bilateral creditors (both traditional creditors members of the Paris Club and new creditors), private creditors and borrowing countries.

What issues will it cover?

The focus of the Global Sovereign Debt Roundtable is on process and standards, not to discuss country cases. The GSDR will not replace existing restructuring mechanisms such as the Common Framework. Instead, it will support those mechanisms by fostering greater common understanding on concepts and principles, which will in turn facilitate individual restructurings. For example, the Roundtable could ease bottlenecks stemming from lack of clarity on how to set cut-off dates, how to assess and enforce comparability of treatment, sharing of information among debtors, creditor, and IFIs, among other issues.

Source: IMF