Economy
Sri Lanka bondholders sent $12 billion debt rework proposal to government -sources
© Reuters. FILE PHOTO: A general view of city’s skyline, amid the country’s economic crisis in Colombo, Sri Lanka, April 19, 2022. REUTERS/Dinuka Liyanawatte
By Jorgelina do Rosario
LONDON (Reuters) – Sri Lanka’s private creditors have sent a proposal on how to restructure $12 billion of overseas debt, including a new type of bond designed to ease repayments in case of future economic pressure, said two sources with direct knowledge of the matter.
The country of 22 million people tipped into its first foreign debt default in May 2022, after a severe shortage of dollars triggered its worst financial crisis since independence from Britain in 1948.
The proposal sent on Oct. 2 provides a write-down, or haircut, on both capital and interest, added the sources who declined to be named because the talks are private.
It foresees issuance of regular sovereign bonds and also of so-called Macro Linked Bonds (MLBs), which will automatically lower coupon payments starting in 2027 if Sri Lanka fails to meet some of the economic targets linked to its International Monetary Fund (IMF) programme.
Representatives for the government did not respond to a request for comment. A spokesperson representing the creditor committee did not reply to a request for comment.
The overall proposal includes an option for creditors that combines MLB notes with a regular bond and a second option of regular bonds with a Value Recovery Instrument (VRI), one of the sources said.
The MLBs were included to ensure the new instruments would be index eligible, the sources said.
Bonds included in an index generally have more liquidity.
The proposal would be a crucial step for Sri Lanka which, under the terms of a $2.9 billion IMF bailout secured in March, has to provide assurances of debt restructuring from bondholders and key bilateral lenders including China, Japan and India.
It would be the first time such step-down bonds are being used in a debt restructuring, the sources added.
The trigger of the step-down payments on the MLBs would be linked to indicators such as Sri Lanka’s gross financing needs (GFN) to gross domestic product (GDP) ratio and debt to GDP ratio, one of the sources said.
If the GFN/GDP ratio rises “above 4.5% in 2027, coupons will adjust downwards”, the source added.
The restructuring proposal is based on parameters from the debt sustainability analysis that the IMF produced when it agreed the programme for the battered economy.
A copy of the proposal was also sent to the IMF and the Paris club secretariat, one of the sources said.
Bondholders and the government remain in discussions through financial and legal advisers, so they are still not restricted to trade the country’s securities.
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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