Sri Lanka’s superannuation funds will have rupee-denominated bonds held by them re-profiled with securities of coupon rates, which will vary from 9% to 12%, a source said. — Bloomberg
COLOMBO: Sri Lanka’s commercial banks have been excluded from the nation’s local debt restructuring strategy, according to a person familiar with the matter, in a decision that may calm fears of instability in the financial system.
Instead, Sri Lanka’s superannuation funds will have rupee-denominated bonds held by them re-profiled with securities of coupon rates, which will vary from 9% to 12%, the person said, asking not to be identified as the details are still private.
The South Asian island nation’s cabinet at a special meeting earlier, unanimously approved the blueprint for an overhaul of domestic debt, a key step in efforts to pull the nation’s economy out from the worst crisis in seven decades.
Sri Lanka’s Parliament will convene on July 1 to discuss the strategy proposed by the finance ministry, according to the media unit of President Ranil Wickremesinghe.
The domestic debt restructuring plan will also be discussed by the parliament’s committee on public finance on June 29 and 30.
Calls to junior finance minister Shehan Semasinghe seeking comments on the overhaul went unanswered.
The domestic debt restructuring plan will be limited to a maturity extension and reduction in interest, Minister of State for Finance Ranjith Siyambalapitiya said last week.
The blueprint is key to cash-strapped Sri Lanka striking a deal with its creditors, as the island nation seeks to balance demands of domestic institutions, foreign bondholders and bilateral creditors.
Overseas investors have demanded that domestic bond holders take a share in the losses.
Some of the nation’s biggest lenders including Commercial Bank of Ceylon Plc and Hatton National Bank Plc have raised concerns about capital impairment.
“Based on our statistical model, it is possible to meet the gross financing needs target comfortably by extending the maturities of bonds in superannuation funds and the three state banks,” said Udeeshan Jonas, chief strategist at Capital Alliance group in Colombo. — Bloomberg
