Debt-laden Sri Lanka should be able to conclude a new round of restructuring talks by September or November at the latest, its president said on Thursday, adding that the negotiations had made “remarkable” progress.
The island nation defaulted on its foreign debt for the first time in its history in April last year, as the worst financial crisis since its independence from Britain in 1948 crushed its economy.
Sri Lanka secured a $2.9 billion bailout from the International Monetary Fund in March and has previously said it aims to complete talks on restructuring debt owed to bilateral creditors and overseas bondholders by September.
It was not clear whether President Ranil Wickremesinghe’s comment signalled a possible delay in the process. He was speaking as he began a meeting with Japanese Prime Minister Fumio Kishida at the latter’s office in Tokyo.
The two leaders affirmed the importance of transparent and fair debt restructuring, according to a summary of their discussions issued by Japan.
“We have made remarkable headway as far as the debt restructuring talks are concerned,” Wickremesinghe said.
“(We) should be able to conclude by September, or November the latest,” which he said would mark an end to Sri Lanka’s economic crisis.
A Japanese finance ministry official said they did not believe the president was signalling a delay.
Kishida, speaking after his first meeting with the Sri Lankan leader since last September, told a forum: “Sri Lanka is a hub of the Indian Ocean. Japan has led the debate among its creditor countries, and we will continue to contribute and strive to help Sri Lanka get back on a track for growth.”
Last month, France, India and Japan unveiled a common platform for talks among bilateral creditors to co-ordinate restructuring of the debt.
“We have now started a creditors’ meeting and all for a successful conclusion before the end of 2023,” Wickremesinghe said. “Sri Lanka is dedicated to ensure equal treatment for all creditors. We want this exercise to succeed because our experience will enable more middle-income countries to utilise the IMF in ensuring multilateral coordination for debt relief.”
Analysts remain sceptical about whether the September deadline can be met.
“I don’t think creditors’ meetings will be concluded by this year-end,” said Toru Nishihama, emerging market analyst at Dai-ichi Life Research Institute. “China, as the largest creditor, holds the key to creditors’ meetings. It must first make it clear on what conditions it lent to Sri Lanka though.”
The IMF called this week for timely restructuring pacts with the country’s creditors. The global lender said Sri Lanka’s macroeconomic situation was improving, although earlier it had predicted the economy would contract 3% this year.
Sri Lanka owes $7.1 billion to its creditors, with $3 billion owed to China, $1.6 billion to India and $2.4 billion to the Paris Club, a group of creditor nations.
At the meeting with Kishida, Wickremesinghe expressed regret over past actions related to Japan including when Sri Lanka called off a major infrastructure deal signed with Tokyo.
The president suggested his country was now keen to restart multiple investment projects with Japan.
“We re-commence the projects that were suspended or cancelled,” he said.