Colombo: Financial advisory group Lazard has begun talks with countries like India, Japan and China to initiate Sri Lanka’s debt restructuring process, a Sri Lankan government spokesperson said Tuesday, amidst the crisis-hit island nation’s worst economic crisis in decades.
In May, Sri Lanka hired Lazard and Clifford Chance, a consortium of international lawyers to kick-start the restructuring of the country’s debt.
Earlier this month, the IMF announced that it will provide Sri Lanka with a loan of about USD 2.9 billion over four years under a preliminary agreement to help the bankrupt island nation tide over its worst economic crisis and protect the livelihoods of the people.
However, for the deal to go through, the country will require debt relief from its three main creditors, namely India, China and Japan.
Together, they hold about USD 13 billion of Sri Lanka’s debt, with China being Sri Lanka’s largest bilateral creditor.
“They are in the process of speaking to India, China, Japan, mainly to ensure we come to some sort of consensus”, the Daily Mirror Lanka newspaper quoted acting cabinet spokesperson Ramesh Pathirana as saying, while referring to Lazard.
“We will keep our fingers crossed that we will be able to come to an agreement,” he added.
Sri Lanka, a country of 22 million people, is going through its worst economic crisis since its independence in 1948 which was triggered by a severe paucity of foreign exchange reserves.
In mid-April, Sri Lanka declared its international debt default due to the forex crisis.
The country owes USD 51 billion in foreign debt, of which USD 28 billion must be paid by 2027.
There have been street protests in Sri Lanka against the government since early April due to its mishandling of the economic crisis.
A crippling shortage of foreign reserves has led to long queues for fuel, cooking gas, and other essentials while power cuts and soaring food prices have heaped misery on the people.