Special committee to select financial adviser

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The process of selecting a financial adviser, for the foreign debt restructuring process in Sri Lanka, will be decided by a Cabinet approved committee comprising senior officials of the Central Bank and the Ministry of Finance, a senior Central Bank official said.

The committee is chaired by the Assistant Governor of the Central Bank
K. M. A. N. Daulagala.

The request for proposal (RFP) calling process for the appointment of Financial Adviser was called yesterday and the relevant Financial Adviser appointment process will be completed within next 2-3 weeks.

In addition, the Attorney General’s Department will take the initiative to appoint a legal adviser related to this process.

Sri Lanka has been faced with a very challenging economic situation, as a result of the decline in foreign reserves in recent months. According to the government officials, Sri Lanka’s foreign reserves that could be used in external finance are currently in a negative state.

The IMF had already decided that
Sri Lanka’s debt is unsustainable.

Sri Lanka will have to restructure foreign debt to bring the gross financing needed to a feasible level and has to allow rates to go up to stop Central Bank financing of domestic debt.

The contemplated debt restructuring operation is aimed at (1) providing sufficient short-term debt relief while (2) ensuring the long-term debt sustainability of Sri Lanka.

The negotiations with the bondholders centred around achieving two sustainability targets fixed by the IMF.

The Government has already suspended the servicing of its foreign loans, instalments and interest payments due to the deepening economic crisis.

Sri Lanka has already made an announcement on the Government’s intention to restructure sovereign external debt in order to maintain the required IMF debt sustainability and seek assistance from the IMF to commence negotiations for debt restructuring with creditors and financial assistance.

The Key role of the incoming financial adviser is to assist the authorities in their discussions with the IMF towards the conclusion of an Extended Credit Facility programme, including technical assistance on the finalisation of a plurennial macro-fiscal framework.

It also includes assisting the authorities in designing and implementing a long term sustainable solution to Sri Lanka’s current external debt situation. It includes a comprehensive assessment of Sri Lanka’s Public and Publicly-guaranteed debt and the preparation of a Debt Sustainability Analysis and the assessment of the country’s payment capacity, under the macro-fiscal framework discussed with the IMF.

The negotiation of restructuring parameters with external creditors to restore Sri Lanka’s long-term debt sustainability, taking into consideration different restructuring guidelines between the Chinese public creditors and other public and commercial creditors. Enabling the Debt restructuring agreement with the China is the most crucial thing and already Sri Lankan authorities have commenced the related discussion with Chinese Government.

Assisting the authorities in their communication with rating agencies with a view to restoring the international credibility of the country, including: The preparation and the regular dissemination of targeted communication and marketing supports and the pursuit of a constructive dialogue with all agencies, The elaboration of a credible credit story to convey to the rating agencies to reassure the country’s future prospects, are also part of the financial adviser‘s role.

By Ishara Gamage