Sri Lanka will soon recommence discussions with bondholders and is optimistic on achieving a resolution regarding debt restructuring by Jun 2024.
The negotiations primarily focused on the bondholders’ proposal, particularly concerning the introduction of a Macro-Linked Bond (MLB). The March proposal suggested a 20% haircut on the nominal amount of existing bonds and the April proposal increased the haircut to 28% with no haircuts on Public Debt Interests (PDIs) in both March and April proposals, says First Capital Research in their monthly economic watch for 2024 May.
Following discussions, the bondholders revised their proposal in April 2024 to address some of the government’s concerns.
“The IMF is currently assessing the latest proposal of the ad hoc group,” First Capital said.
Commenting on some local economic developments it said that Foreign Reserves increased by USD 478.0 million to reach USD 5.4 billion in April 2024. “This was led by the continuous buying of dollars by the Government.”
Market Liquidity fluctuated and broadly turned positive during the month of April 2024. On March 24, earnings from exports rose by 9.8%YoY to USD 1,138.9Mn, up from USD 1,037.5Mn on March 23. All major export categories, including industrial, agricultural, and mineral goods, saw increases. Industrial exports were boosted by petroleum products, driven by higher volumes of bunkering and aviation fuel exports while textiles and garments exports also recorded a notable improvement. Agricultural exports, particularly tea, saw improved earnings due to higher volumes. Mineral exports also experienced a slight increase.
March 24 witnessed a notable boost in export earnings, primarily driven by a surge in textiles and garments exports, reaching the highest levels recorded since December 2022.
Workers’ Remittances increased marginally to USD 572.0 Mn in March 2024 (+0.7%YoY). Earnings from Tourism for March 2024 increased substantially to USD 338.4 million from USD 188.8 million in March 2023. Balance of Payment for January to March 2024 was recorded at USD 719.8 million compared to January to February 2024 amount of USD 247.0 million resulting in a net inflow of USD 472.8 millio, for the month of March 2024.
