Sri Lanka To Wrap Up Bond Talks Soon, Seek To Balance India-China Ties

Sri Lanka will wrap up talks with international bondholders on restructuring USD 12.5 billion in debt within a few weeks, Foreign Minister Ali Sabry said on Tuesday, a major step for the island nation to emerge from its worst financial crisis in decades.

Sri Lanka will also seek to balance its ties with giant neighbour India and China to ensure that there is no difference in dealing with the two, he said, as the rival Asian giants are key creditors and investors but are also jostling for geopolitical influence in the small Indian Ocean country.

"Hopefully within a couple of weeks," Sabry said in an interview at the Reuters NEXT conference in Singapore when asked when the nation's bond restructuring efforts with creditors will be finished.

"Towards the end of this month, officially, we are done and dusted with the restructuring process, then of course, in line with that, we need to start payment," he said.

Sri Lanka secured a provisional agreement with some of its bondholders to move forward on restructuring its international bonds last week but now needs the other private creditors and the International Monetary Fund (IMF) to also agree.

The country, which has USD 37 billion in external debt in total, clinched an agreement with its official creditors including Japan, China and India in late June to restructure USD 10 billion in debt.

In total, the debt rework is estimated to save Sri Lanka USD 8 billion in write-offs and delay capital repayments by at least four years.

Sri Lanka will use this opportunity to restart about a dozen stalled, foreign-funded development projects and promote economic growth, Sabry said.

Sri Lanka needs to continue reforms including imposing property taxes, revamp loss-making state-owned companies and improve dollar reserves to put its economy fully on track, the IMF said in its latest review.