(Bloomberg) -- Sri Lanka and China agreed to restructure $4.2 billion of debt, putting the South Asian nation closer to securing more funds from the International Monetary Fund.
Local authorities and the Export-Import Bank of China will actively work on formalising and implementing the debt treatment in the next few weeks, the statement said. It did not elaborate on the details of the deal.
The preliminary agreement puts Sri Lanka closer to completing its debt restructuring, as the nation boosts efforts to win agreements with other creditors such as Japan and India, as well as with holders of its foreign bonds. The terms of the China deal will be key to Sri Lanka's negotiations with other creditors as officials thrash out details of how losses will be shared.
“The Sri Lankan authorities hope that this landmark achievement will provide an anchor to their ongoing engagement with the Official Creditor Committee and commercial creditors, including the bondholders,” the statement said.
The deal should help the nation win IMF board approval of the first review in its $3 billion bailout program in the coming weeks, allowing for the next tranche of financing of about $334 million to be disbursed, it said.
Paris Club members and other lenders are expected to hold talks this week in Morocco during the IMF-World Bank annual meetings.
Sri Lanka's dollar bonds had surged more than 50% this year as the nation's IMF bailout spurred optimism over its fiscal health recovery. Notes due in 2030 were steady at about 46 cents on the dollar on Thursday.
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