- Says unable to find potential lenders until then
- Debt restructuring requires appointment of debt advisors
- Appointment delayed due to lack of Cabinet
By Tanya Shan
The debt-ridden State-owned fuel supplier Ceylon Petroleum Corporation (CPC) is in a difficult situation in terms of obtaining financial assistance from international lenders to keep its business going as the debt restructuring process of the country is facing delays, The Sunday Morning Business learns.
An official spokesperson of the CPC told The Sunday Morning Business that the CPC would want to seek international lenders but it was unable to do so until the Government commenced the debt restructuring process.
Debt restructuring provides a less expensive alternative to bankruptcy when a debtor is in financial turmoil and it can work to the benefit of both borrower and lender. Lenders are usually hesitant to lend more money when the defaulted debt is not restructured.
Restructuring of Sri Lanka’s debt has been faced with delays due to the absence of a full Cabinet, as revealed by former Minister of Finance and Minister of Justice Ali Sabry PC.
Sabry stated that even though the country had finalised its Request For Proposals (RFPs) for the appointment of debt restructuring advisors to aid the ailing economy after a recent default, the final approval was in the hands of the Cabinet of Ministers.
“The RFPs are finalised. A Steering Committee and a Technical Committee have been appointed. However, the authority that appoints debt advisors is the Cabinet and as we still do not have a complete Cabinet, a meeting in this regard cannot be held,” he stated.
Sabry further stated that the Central Bank Governor and the Treasury Secretary had also noted that their recommendations on the appointment of debt advisors had been finalised, although this, too, needed Cabinet approval.
“Following Cabinet approval, we should be able to appoint the advisors. As soon as that happens, we will be able to negotiate with the bondholders and others,” Sabry clarified.
The Government on 12 April announced that it would be suspending the servicing of selected debts, amidst what is considered the worst economic crisis the country has ever endured.
In the defaulting statement, the Ministry of Finance stated that it would opt for an orderly and consensual restructuring of these debt obligations in a manner consistent with an economic adjustment programme supported by the International Monetary Fund (IMF).
International news reports stated that the IMF had asked cash-strapped Sri Lanka to “restructure” its huge foreign debt before a bailout programme could be finalised as anti-Government protests escalated across the island.
“When the IMF determines that a country’s debt is not sustainable, the country needs to take steps to restore debt sustainability prior to IMF lending,” the Fund’s Country Director Masahiro Nozaki said in a statement.
“Approval of an IMF-supported program for Sri Lanka will require adequate assurances that debt sustainability will be restored.”