SL to hire int’l law firm to assist debt restructuring

• Govt. says transparent process will be followed in appointing the law firm
• Foreign Minister, Justice Minister, CB Governor and Treasury Secy. to oversee the process
• President Gotabaya Rajapaksa last week announced govt.’s decision to work with IMF

In line with the policy decision taken to seek International Monetary Fund’s (IMF) assistance, the government is moving to hire an international law firm on long-term basis to obtain technical assistance to restructure the country’s external debt with IMF backing.

“We have taken a policy decision to go to the IMF, for which we need a technical committee. In relation to technical matters, we have taken the decision to hire a company on a long-term basis, for which we need to have a transparent process,” Co-Cabinet Spokesperson and Plantation Minister Ramesh Pathirana revealed during the weekly Cabinet media briefing yesterday.

The Cabinet of Ministers last week took a policy decision to initiate talks with IMF and President Gotabaya Rajapaksa officially announced the decision of addressing the nation in the same week. 

The Minister assured that a transparent process would be followed in selecting a law firm. Foreign Minister Prof. G. L. Pieris and Justice Minister Ali Sabry will oversee the process with the assistance of Central Bank Governor Ajith Nivard Cabraal and Secretary to the Treasury S.R. Attygalle.

Finance Minister Basil Rajapaksa is scheduled to attend the IMF-World Bank spring meetings in Washington DC in mid-April, where he is largely expected to strike a deal with the multilateral lender for a rescue programme.

The government is also receiving expert advice from a 16-member Advisory Committee appointed to assist the Economic Council on obtaining technical advice in setting the initial tone for negotiations with IMF and the debt structuring process, according to Pathirana.

Meanwhile, several investors of Sri Lanka’s dollar-denominated international sovereign bonds (ISBs) have reportedly hired the reputed law firm White & Case LLP to obtain legal advice on possible future debt restructuring negotiations.

The IMF under its annual Article IV consultations recommended the government to focus on fiscal consolidation based on high-quality revenue measures while advocating for a tighter monetary policy stance to contain the rising inflationary pressures in order to come out of the current crisis. 

It also prescribed the government to float the rupee, price utilities at market prices and to reform unproductive State enterprises to reduce the debt burden.

The anticipated programme with IMF, which would involve a debt restructuring exercise, is expected to bring the country’s debt to a sustainable level while easing the on-going foreign exchange crisis.

Sri Lanka’s foreign reserves have slumped 70 percent in the last two years to US$ 2.31 billion and it has to repay about US$ 4 billion in debt in the remainder of this year.