Financial trouble: People walk past the main entrance of Sri Lanka’s central bank in Colombo. Sri Lanka defaulted for the first time in May and aims to finalise debt-restructuring talks with international creditors by the second quarter of 2023. — Reuters
WASHINGTON: Paris Club creditors reached out to China and India to coordinate Sri Lanka’s debt-restructuring talks, according to a person familiar with the matter, in an attempt to bring major global creditors together to rework the obligations of emerging economies.
The club, an informal group of mostly rich, western bilateral creditors, is awaiting a response from both countries after it sent an official request in late August to work together, said an official who declined to be identified because talks are continuing.
Coordinating on Sri Lanka may result in the formation of an official creditors committee or simply holding regular meetings to share information on debt treatment, the official said.
Sri Lanka’s presidency said it’s unaware of the efforts by the club. An Asian diplomat in Colombo, Sri Lanka’s capital, confirmed that the Paris Club had been in contact with the country’s non-Paris Club creditors.
Chinese and Indian government officials weren’t available for comment due to public holidays.
The formation of an official creditors committee in which China and India agreed to work together with the Paris Club would help Sri Lanka secure a US$2.9bil (RM13.4bil) bailout from the International Monetary Fund.
The Washington-based lender announced a staff-level deal with the government last month, and needs assurances from creditors that they’re willing to negotiate a restructuring before its board can give final approval and start disbursing the much-needed funding.
Sri Lanka defaulted for the first time in May and aims to finalise debt-restructuring talks with international creditors by the second quarter of 2023. The government has said it will ensure transparency and equal treatment among creditors.
The Group of 20 (G-20) leading economies has so far failed to reach a consensus to include middle-income countries, such as Sri Lanka, in its so-called Common Framework, a plan to reorganise loans owed by the world’s poorest nations that has been plagued by delays since its inception in 2020.
Bringing major creditors China and India to the table would mark a new chapter in global efforts to jointly rework the debt of nations facing soaring financing costs that could trigger a slew of defaults.
Convincing China, the world’s largest official bilateral creditor, to work with the Paris Club would be especially important for developing countries, which have taken tens of billions of dollars of loans from Beijing over the past two decades to build everything from roads and bridges to soccer stadiums and presidential villas. — Bloomberg
