In Government of Sri Lanka’s (GoSL’s) domestic debt restructuring programme, only Treasury (T)-Bills held by the Central Bank of Sri Lanka, also known as money printing (MP) and T-Bonds will be taken in to account, the Finance Ministry (Treasury) in a statement on Thursday (4 May) said.
It further said that MP is equivalent to 62.4 per cent of total outstanding T-Bills. All other T-Bills are excluded from the envisaged operation, the Ministry said
The Ministry which calls ‘domestic debt restructuring’ by the phrase ‘domestic debt optimisation’ further said that in the case of T Bond restructuring, the Ministry said, ‘All T-Bonds may be considered for participation in a voluntary domestic debt optimization operation, provided that it can be designed to minimize impact on banks and preserve financial stability. The impact on the domestic financial sector is therefore being carefully assessed by the authorities. In particular, the process of voluntary debt optimization operation with respect to T-Bonds will be developed through consultations held by the Sri Lankan Government and its advisers with major T-Bonds holders, aimed at gauging different options and understanding the constraints of each holder.’
The Treasury further said that, ‘Sri Lanka is devising a comprehensive strategy to restructure the balance sheets of some key SOEs, notably CPC, CEB, RDA and SriLankan Airlines (this strategy needs to receive cabinet approval by June 2023). The precise timelines and restructuring modalities will be outlined in the Government’s strategy. The restructuring of SriLankan’s balance sheet will encompass its entire stock of debt (incl. its Government guaranteed international bond). The modalities remain yet to be determined but will be made public in due course. All these structural measures will enable Sri Lanka to strengthen the governance of its SOEs and to make them financially viable, hence alleviating their weight on public finances.
In addition, the authorities are exploring potential divestment opportunities of several SOEs, the proceeds of which are highly uncertain and therefore not accounted for in the IMF macro-fiscal framework. New developments in that area, if they were to materialize in the medium-term, would be reflected in the macro-framework at the appropriate time (in the context of IMF programme’s reviews).’
Selling T-Bonds and T-Bills is a popular way that the Government raises money to meet its domestic needs.