FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com


Join the forum, it's quick and easy

FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com
FINANCIAL CHRONICLE™
Would you like to react to this message? Create an account in a few clicks or log in to continue.
FINANCIAL CHRONICLE™

Encyclopedia of Latest news, reviews, discussions and analysis of stock market and investment opportunities in Sri Lanka

LISTED COMPANIES

Submit Post


ADVERTS

Poll

EXCHANGE RATE PREDICTION: 2022

Sri Lanka on brink of sovereign bond default, warn investors Vote_lcap16%Sri Lanka on brink of sovereign bond default, warn investors Vote_rcap 16% [ 43 ]
Sri Lanka on brink of sovereign bond default, warn investors Vote_lcap21%Sri Lanka on brink of sovereign bond default, warn investors Vote_rcap 21% [ 57 ]
Sri Lanka on brink of sovereign bond default, warn investors Vote_lcap30%Sri Lanka on brink of sovereign bond default, warn investors Vote_rcap 30% [ 83 ]
Sri Lanka on brink of sovereign bond default, warn investors Vote_lcap34%Sri Lanka on brink of sovereign bond default, warn investors Vote_rcap 34% [ 93 ]

Total Votes : 276

ශ්‍රී ලංකා මූල්‍ය වංශකථාව - සිංහල
Submit Post


CONATCT US


Send your suggestions and comments

* - required fields

Read FINANCIAL CHRONICLE™ Disclaimer



Latest topics

» LOLC FINANCE PLC (LOFC.N0000)
by sojsilva Sat Nov 26, 2022 10:07 am

» Sri Lanka bond yields extend fall on DDR comments
by K.R Fri Nov 25, 2022 11:32 pm

» What will happen tomorrow?
by K.R Thu Nov 24, 2022 7:56 am

» CENTRAL INDUSTRIES PLC (CIND.N0000)
by ErangaDS Wed Nov 23, 2022 6:34 pm

» KZOO.N SHAW WALLACE INVESTMENTS PLC TP 10/
by cheetah Wed Nov 23, 2022 11:16 am

» SUNSHINE HOLDINGS PLC (SUN.N0000)
by ErangaDS Wed Nov 23, 2022 6:53 am

» SRI LANKA TELECOM (SLTL.N0000) - Reawakening the Giant
by Equity Win Tue Nov 22, 2022 12:10 pm

» EXTERMINATORS PLC (EXT.N0000)
by ErangaDS Tue Nov 22, 2022 10:35 am

» Focus on Government controlled entities
by K.R Sun Nov 20, 2022 10:45 am

» Singapore based Kreate Design to invest USD 1 Billion to Colombo Lotus Tower
by K.R Sat Nov 19, 2022 1:40 pm

» China working with other lenders on ‘easing’ Sri Lanka debt
by K.R Sat Nov 19, 2022 1:31 pm

» Billionaire owned listed companies faces insolvency issues in Sri Lanka
by God Father Sat Nov 19, 2022 10:11 am

» Wahts going on with Expo
by sanjayaK Fri Nov 18, 2022 2:23 pm

» REGULATORS - DUTY OF CARE
by God Father Fri Nov 18, 2022 1:47 pm

» CIC going to next level
by suku502 Wed Nov 16, 2022 12:51 pm

» PEOPLE'S INSURANCE PLC (PINS.N0000)
by K.R Tue Nov 15, 2022 8:03 pm

» LANKA HOSPITAL + SRI LANKA TELECOM + HOUSING DEVELOPMENT COOPERATION
by nish84 Tue Nov 15, 2022 4:29 pm

» SEYLAN DEVELOPMENTS PLC (CSD.N0000)
by Thushara Ayya Tue Nov 15, 2022 10:16 am

» Budget Analysis 2023 - KPMG Sri Lanka
by CHRONICLE™ Tue Nov 15, 2022 9:17 am

» HAPUGASTENNE PLANTATIONS PLC (HAPU.N0000)
by Dilshan2020 Tue Nov 15, 2022 8:39 am

EXPERT CHRONICLE™

MARKET CHAT


ECONOMIC CHRONICLE

GROSS DOMESTIC PRODUCT (GDP)


CHRONICLE™ YouTube

LATEST TWEETS

You are not connected. Please login or register

FINANCIAL CHRONICLE™ » EXPERT CHRONICLE™ » Sri Lanka on brink of sovereign bond default, warn investors

Sri Lanka on brink of sovereign bond default, warn investors

Go down  Message [Page 1 of 1]

God Father

avatar
Manager - Equity Analytics
Manager - Equity Analytics

Sri Lanka on brink of sovereign bond default, warn investors Screen63
Investors are braced for Sri Lanka to default during the Covid-19 pandemic, saying they expect Asia’s top high-yield bond issuer to restructure its debt and call on the IMF for assistance as its financial crisis worsens.

The South Asian island was plunged into crisis after a cascade of rating downgrades following large tax cuts in 2019 and the loss of tourism during the pandemic, leaving it unable to tap global markets.

Sri Lanka owes $15bn in bonds, mostly dollar-denominated, of a total $45bn long-term debt, according to the World Bank. It needs to pay about $7bn this year in interest and debt repayments but its foreign reserves have dwindled to less than $3bn.

The government’s next big challenge is a $1bn bond repayment due in July. If it fails to pay, it would join countries including Suriname, Belize, Zambia, and Ecuador in defaulting on its debt following the pandemic.

“They are demonstrating an amazing willingness to pay,” said Richard House, head of emerging market debt at Allianz Global Investors. “But why they would want to, I’m a bit flabbergasted. They are bankrupt, pretty much.”

He added: “They are wasting precious FX reserves. It’s just delaying the inevitable.”

Sri Lanka’s finance minister, Basil Rajapaksa, told the Financial Times last month that the country was “trying all options” to avoid default. But its dollar-denominated bonds are trading at near half their face value, a level that implies a high probability investors will not be repaid in full.


“At these levels, a restructuring over the next 12 months should be the base-case scenario,” said Polina Kurdyavko, head of emerging market debt at BlueBay Asset Management, which holds some Sri Lankan bonds. “I find it difficult to see them muddling through this year.”

Sri Lanka first tapped bond markets more than a decade ago, taking advantage of western investors’ thirst for high-yielding assets as it sought to finance reconstruction following a civil war that ended in 2009.

It has since become an important player in global sovereign debt markets and has borrowed billions from countries including China and Japan. Sri Lanka has never defaulted and its successive governments have been known for a market-friendly approach.

President Gotabaya Rajapaksa’s government has said the country will survive the economic crisis by attracting more tourists and boosting exports, but many investors view this as unrealistic. It has also negotiated more than $1bn in relief from India and has asked China to restructure its debt.

The shortage of dollars has begun to inflict deep economic pain on the import-dependent nation. Cities including the commercial capital Colombo face regular electricity blackouts because of fuel shortages, while other essentials such as cement or milk powder are in short supply, resulting in double-digit domestic inflation.

“People don’t need to suffer like this,” said Roshan Rashid, the owner of a ceramics shop in Colombo. Prices of the tiles he buys have more than doubled after the government banned imports in an effort to save dollars.

Ahilan Kadirgamar, a sociologist at the University of Jaffna who works with rural co-operatives, said the economic crisis was “by far the worst kind we’ve been through since independence” in 1948.

He argued that the government needed to drastically reduce imports and prioritise distribution of food, medicine and other essentials. “Poverty is more visible now. People are finding it harder to cook one or two meals a day,” he said.

There are signs authorities are rethinking their approach. Rajapaksa told the FT that the government was “negotiating with everybody” including bondholders and was weighing an approach to the IMF.

Sri Lanka has previously entered 16 programmes with the IMF, but about half of those were not completed. Investors said the fund was likely to insist on a restructuring before providing assistance.

“If the IMF were to extend a programme, it would necessarily involve some level of restructuring,” said Daniel Alphonsus, a former adviser to Sri Lanka’s finance ministry under the previous government.

Manjuka Fernandopulle, an independent lawyer in Colombo who specialises in debt restructuring, said the “IMF is the only credible option”.

But the presence of a wide range of creditors — particularly the heavy borrowing from China — could complicate attempts to restructure the debt.

In Zambia, where authorities are restructuring debts of about $15bn to secure an IMF loan, the process has been beset by accusations from bondholders that the government was favouring Chinese creditors.

Kurdyavko said: “It’s important to have all creditors on board. We want to avoid the dynamic where one group tries to push a certain angle to disadvantage the others.”

Despite the threat of default, some investors are contemplating whether now is the time to buy Sri Lanka bonds, as prices are so low. House said bondholders could end up receiving more than 50 cents on the dollar in a restructuring deal.

“It’s been a terrible credit for a long time, it’s now being priced as a terrible credit,” he said.

https://www.ft.com/content/09e1159f-9c45-4379-b862-98cb5e30a4da

Sunimal likes this post

Niwa dislikes this post

Share this post on: reddit

God Father wrote:
Sri Lanka on brink of sovereign bond default, warn investors Screen63
Investors are braced for Sri Lanka to default during the Covid-19 pandemic, saying they expect Asia’s top high-yield bond issuer to restructure its debt and call on the IMF for assistance as its financial crisis worsens.

The South Asian island was plunged into crisis after a cascade of rating downgrades following large tax cuts in 2019 and the loss of tourism during the pandemic, leaving it unable to tap global markets.

Sri Lanka owes $15bn in bonds, mostly dollar-denominated, of a total $45bn long-term debt, according to the World Bank. It needs to pay about $7bn this year in interest and debt repayments but its foreign reserves have dwindled to less than $3bn.

The government’s next big challenge is a $1bn bond repayment due in July. If it fails to pay, it would join countries including Suriname, Belize, Zambia, and Ecuador in defaulting on its debt following the pandemic.

“They are demonstrating an amazing willingness to pay,” said Richard House, head of emerging market debt at Allianz Global Investors. “But why they would want to, I’m a bit flabbergasted. They are bankrupt, pretty much.”

He added: “They are wasting precious FX reserves. It’s just delaying the inevitable.”

Sri Lanka’s finance minister, Basil Rajapaksa, told the Financial Times last month that the country was “trying all options” to avoid default. But its dollar-denominated bonds are trading at near half their face value, a level that implies a high probability investors will not be repaid in full.


“At these levels, a restructuring over the next 12 months should be the base-case scenario,” said Polina Kurdyavko, head of emerging market debt at BlueBay Asset Management, which holds some Sri Lankan bonds. “I find it difficult to see them muddling through this year.”

Sri Lanka first tapped bond markets more than a decade ago, taking advantage of western investors’ thirst for high-yielding assets as it sought to finance reconstruction following a civil war that ended in 2009.

It has since become an important player in global sovereign debt markets and has borrowed billions from countries including China and Japan. Sri Lanka has never defaulted and its successive governments have been known for a market-friendly approach.

President Gotabaya Rajapaksa’s government has said the country will survive the economic crisis by attracting more tourists and boosting exports, but many investors view this as unrealistic. It has also negotiated more than $1bn in relief from India and has asked China to restructure its debt.

The shortage of dollars has begun to inflict deep economic pain on the import-dependent nation. Cities including the commercial capital Colombo face regular electricity blackouts because of fuel shortages, while other essentials such as cement or milk powder are in short supply, resulting in double-digit domestic inflation.

“People don’t need to suffer like this,” said Roshan Rashid, the owner of a ceramics shop in Colombo. Prices of the tiles he buys have more than doubled after the government banned imports in an effort to save dollars.

Ahilan Kadirgamar, a sociologist at the University of Jaffna who works with rural co-operatives, said the economic crisis was “by far the worst kind we’ve been through since independence” in 1948.

He argued that the government needed to drastically reduce imports and prioritise distribution of food, medicine and other essentials. “Poverty is more visible now. People are finding it harder to cook one or two meals a day,” he said.

There are signs authorities are rethinking their approach. Rajapaksa told the FT that the government was “negotiating with everybody” including bondholders and was weighing an approach to the IMF.

Sri Lanka has previously entered 16 programmes with the IMF, but about half of those were not completed. Investors said the fund was likely to insist on a restructuring before providing assistance.

“If the IMF were to extend a programme, it would necessarily involve some level of restructuring,” said Daniel Alphonsus, a former adviser to Sri Lanka’s finance ministry under the previous government.

Manjuka Fernandopulle, an independent lawyer in Colombo who specialises in debt restructuring, said the “IMF is the only credible option”.

Recommended

Gillian Tett
Argentina’s IMF deal offers a warning on emerging market debt

But the presence of a wide range of creditors — particularly the heavy borrowing from China — could complicate attempts to restructure the debt.

In Zambia, where authorities are restructuring debts of about $15bn to secure an IMF loan, the process has been beset by accusations from bondholders that the government was favouring Chinese creditors.

Kurdyavko said: “It’s important to have all creditors on board. We want to avoid the dynamic where one group tries to push a certain angle to disadvantage the others.”

Despite the threat of default, some investors are contemplating whether now is the time to buy Sri Lanka bonds, as prices are so low. House said bondholders could end up receiving more than 50 cents on the dollar in a restructuring deal.

“It’s been a terrible credit for a long time, it’s now being priced as a terrible credit,” he said.

https://www.ft.com/content/09e1159f-9c45-4379-b862-98cb5e30a4da

It is very seriously risky to do new investments on the stock market for at least until the next several years. Unless you want to throw some money you reserved merely for gambling so that losing is not a issue at all.

Retailers who have already invested wisely  must be watchful everyday on their stocks and have patients.

Next International credit ratings could bring the CSE further down. Beware !!

Niwa, nigma and stockchaser dislike this post

Sunimal wrote:
God Father wrote:
Sri Lanka on brink of sovereign bond default, warn investors Screen63
Investors are braced for Sri Lanka to default during the Covid-19 pandemic, saying they expect Asia’s top high-yield bond issuer to restructure its debt and call on the IMF for assistance as its financial crisis worsens.

The South Asian island was plunged into crisis after a cascade of rating downgrades following large tax cuts in 2019 and the loss of tourism during the pandemic, leaving it unable to tap global markets.

Sri Lanka owes $15bn in bonds, mostly dollar-denominated, of a total $45bn long-term debt, according to the World Bank. It needs to pay about $7bn this year in interest and debt repayments but its foreign reserves have dwindled to less than $3bn.

The government’s next big challenge is a $1bn bond repayment due in July. If it fails to pay, it would join countries including Suriname, Belize, Zambia, and Ecuador in defaulting on its debt following the pandemic.

“They are demonstrating an amazing willingness to pay,” said Richard House, head of emerging market debt at Allianz Global Investors. “But why they would want to, I’m a bit flabbergasted. They are bankrupt, pretty much.”

He added: “They are wasting precious FX reserves. It’s just delaying the inevitable.”

Sri Lanka’s finance minister, Basil Rajapaksa, told the Financial Times last month that the country was “trying all options” to avoid default. But its dollar-denominated bonds are trading at near half their face value, a level that implies a high probability investors will not be repaid in full.


“At these levels, a restructuring over the next 12 months should be the base-case scenario,” said Polina Kurdyavko, head of emerging market debt at BlueBay Asset Management, which holds some Sri Lankan bonds. “I find it difficult to see them muddling through this year.”

Sri Lanka first tapped bond markets more than a decade ago, taking advantage of western investors’ thirst for high-yielding assets as it sought to finance reconstruction following a civil war that ended in 2009.

It has since become an important player in global sovereign debt markets and has borrowed billions from countries including China and Japan. Sri Lanka has never defaulted and its successive governments have been known for a market-friendly approach.

President Gotabaya Rajapaksa’s government has said the country will survive the economic crisis by attracting more tourists and boosting exports, but many investors view this as unrealistic. It has also negotiated more than $1bn in relief from India and has asked China to restructure its debt.

The shortage of dollars has begun to inflict deep economic pain on the import-dependent nation. Cities including the commercial capital Colombo face regular electricity blackouts because of fuel shortages, while other essentials such as cement or milk powder are in short supply, resulting in double-digit domestic inflation.

“People don’t need to suffer like this,” said Roshan Rashid, the owner of a ceramics shop in Colombo. Prices of the tiles he buys have more than doubled after the government banned imports in an effort to save dollars.

Ahilan Kadirgamar, a sociologist at the University of Jaffna who works with rural co-operatives, said the economic crisis was “by far the worst kind we’ve been through since independence” in 1948.

He argued that the government needed to drastically reduce imports and prioritise distribution of food, medicine and other essentials. “Poverty is more visible now. People are finding it harder to cook one or two meals a day,” he said.

There are signs authorities are rethinking their approach. Rajapaksa told the FT that the government was “negotiating with everybody” including bondholders and was weighing an approach to the IMF.

Sri Lanka has previously entered 16 programmes with the IMF, but about half of those were not completed. Investors said the fund was likely to insist on a restructuring before providing assistance.

“If the IMF were to extend a programme, it would necessarily involve some level of restructuring,” said Daniel Alphonsus, a former adviser to Sri Lanka’s finance ministry under the previous government.

Manjuka Fernandopulle, an independent lawyer in Colombo who specialises in debt restructuring, said the “IMF is the only credible option”.

Recommended

Gillian Tett
Argentina’s IMF deal offers a warning on emerging market debt

But the presence of a wide range of creditors — particularly the heavy borrowing from China — could complicate attempts to restructure the debt.

In Zambia, where authorities are restructuring debts of about $15bn to secure an IMF loan, the process has been beset by accusations from bondholders that the government was favouring Chinese creditors.

Kurdyavko said: “It’s important to have all creditors on board. We want to avoid the dynamic where one group tries to push a certain angle to disadvantage the others.”

Despite the threat of default, some investors are contemplating whether now is the time to buy Sri Lanka bonds, as prices are so low. House said bondholders could end up receiving more than 50 cents on the dollar in a restructuring deal.

“It’s been a terrible credit for a long time, it’s now being priced as a terrible credit,” he said.

https://www.ft.com/content/09e1159f-9c45-4379-b862-98cb5e30a4da

It is very seriously risky to do new investments on the stock market for at least until the next several years. Unless you want to throw some money you reserved merely for gambling so that losing is not a issue at all.

Retailers who have already invested wisely  must be watchful everyday on their stocks and have patients.

Next International credit ratings could bring the CSE further down. Beware !!
Infact CSE activities will be more.. don't just scare people .. given the situation in the country this is the perfect oppertunity to invest . People who comment for creating this fear nothing but a evil plan to artificially bring the market down so that they can buy at low price

nigma and ADVENTUS like this post

stockchaser wrote:
Sunimal wrote:
God Father wrote:
Sri Lanka on brink of sovereign bond default, warn investors Screen63
Investors are braced for Sri Lanka to default during the Covid-19 pandemic, saying they expect Asia’s top high-yield bond issuer to restructure its debt and call on the IMF for assistance as its financial crisis worsens.

The South Asian island was plunged into crisis after a cascade of rating downgrades following large tax cuts in 2019 and the loss of tourism during the pandemic, leaving it unable to tap global markets.

Sri Lanka owes $15bn in bonds, mostly dollar-denominated, of a total $45bn long-term debt, according to the World Bank. It needs to pay about $7bn this year in interest and debt repayments but its foreign reserves have dwindled to less than $3bn.

The government’s next big challenge is a $1bn bond repayment due in July. If it fails to pay, it would join countries including Suriname, Belize, Zambia, and Ecuador in defaulting on its debt following the pandemic.

“They are demonstrating an amazing willingness to pay,” said Richard House, head of emerging market debt at Allianz Global Investors. “But why they would want to, I’m a bit flabbergasted. They are bankrupt, pretty much.”

He added: “They are wasting precious FX reserves. It’s just delaying the inevitable.”

Sri Lanka’s finance minister, Basil Rajapaksa, told the Financial Times last month that the country was “trying all options” to avoid default. But its dollar-denominated bonds are trading at near half their face value, a level that implies a high probability investors will not be repaid in full.


“At these levels, a restructuring over the next 12 months should be the base-case scenario,” said Polina Kurdyavko, head of emerging market debt at BlueBay Asset Management, which holds some Sri Lankan bonds. “I find it difficult to see them muddling through this year.”

Sri Lanka first tapped bond markets more than a decade ago, taking advantage of western investors’ thirst for high-yielding assets as it sought to finance reconstruction following a civil war that ended in 2009.

It has since become an important player in global sovereign debt markets and has borrowed billions from countries including China and Japan. Sri Lanka has never defaulted and its successive governments have been known for a market-friendly approach.

President Gotabaya Rajapaksa’s government has said the country will survive the economic crisis by attracting more tourists and boosting exports, but many investors view this as unrealistic. It has also negotiated more than $1bn in relief from India and has asked China to restructure its debt.

The shortage of dollars has begun to inflict deep economic pain on the import-dependent nation. Cities including the commercial capital Colombo face regular electricity blackouts because of fuel shortages, while other essentials such as cement or milk powder are in short supply, resulting in double-digit domestic inflation.

“People don’t need to suffer like this,” said Roshan Rashid, the owner of a ceramics shop in Colombo. Prices of the tiles he buys have more than doubled after the government banned imports in an effort to save dollars.

Ahilan Kadirgamar, a sociologist at the University of Jaffna who works with rural co-operatives, said the economic crisis was “by far the worst kind we’ve been through since independence” in 1948.

He argued that the government needed to drastically reduce imports and prioritise distribution of food, medicine and other essentials. “Poverty is more visible now. People are finding it harder to cook one or two meals a day,” he said.

There are signs authorities are rethinking their approach. Rajapaksa told the FT that the government was “negotiating with everybody” including bondholders and was weighing an approach to the IMF.

Sri Lanka has previously entered 16 programmes with the IMF, but about half of those were not completed. Investors said the fund was likely to insist on a restructuring before providing assistance.

“If the IMF were to extend a programme, it would necessarily involve some level of restructuring,” said Daniel Alphonsus, a former adviser to Sri Lanka’s finance ministry under the previous government.

Manjuka Fernandopulle, an independent lawyer in Colombo who specialises in debt restructuring, said the “IMF is the only credible option”.

Recommended

Gillian Tett
Argentina’s IMF deal offers a warning on emerging market debt

But the presence of a wide range of creditors — particularly the heavy borrowing from China — could complicate attempts to restructure the debt.

In Zambia, where authorities are restructuring debts of about $15bn to secure an IMF loan, the process has been beset by accusations from bondholders that the government was favouring Chinese creditors.

Kurdyavko said: “It’s important to have all creditors on board. We want to avoid the dynamic where one group tries to push a certain angle to disadvantage the others.”

Despite the threat of default, some investors are contemplating whether now is the time to buy Sri Lanka bonds, as prices are so low. House said bondholders could end up receiving more than 50 cents on the dollar in a restructuring deal.

“It’s been a terrible credit for a long time, it’s now being priced as a terrible credit,” he said.

https://www.ft.com/content/09e1159f-9c45-4379-b862-98cb5e30a4da

It is very seriously risky to do new investments on the stock market for at least until the next several years. Unless you want to throw some money you reserved merely for gambling so that losing is not a issue at all.

Retailers who have already invested wisely  must be watchful everyday on their stocks and have patients.

Next International credit ratings could bring the CSE further down. Beware !!
Infact CSE activities will be more.. don't just scare people .. given the situation in the country this is the perfect oppertunity to invest . People who comment for creating this fear nothing but a evil plan to artificially bring the market down so that they can buy at low price
YEAH, IN CASE OF DEFAULT PEOPLE MAY RUSH INTO DOLLAR EARNING COUNTERS AND ONES WITH LARGE MARKET SHARE.

Sri Lanka on brink of sovereign bond default, warn investors Screen36

ADVENTUS likes this post

ADVENTUS wrote:
stockchaser wrote:
Sunimal wrote:
God Father wrote:
Sri Lanka on brink of sovereign bond default, warn investors Screen63
Investors are braced for Sri Lanka to default during the Covid-19 pandemic, saying they expect Asia’s top high-yield bond issuer to restructure its debt and call on the IMF for assistance as its financial crisis worsens.

The South Asian island was plunged into crisis after a cascade of rating downgrades following large tax cuts in 2019 and the loss of tourism during the pandemic, leaving it unable to tap global markets.

Sri Lanka owes $15bn in bonds, mostly dollar-denominated, of a total $45bn long-term debt, according to the World Bank. It needs to pay about $7bn this year in interest and debt repayments but its foreign reserves have dwindled to less than $3bn.

The government’s next big challenge is a $1bn bond repayment due in July. If it fails to pay, it would join countries including Suriname, Belize, Zambia, and Ecuador in defaulting on its debt following the pandemic.

“They are demonstrating an amazing willingness to pay,” said Richard House, head of emerging market debt at Allianz Global Investors. “But why they would want to, I’m a bit flabbergasted. They are bankrupt, pretty much.”

He added: “They are wasting precious FX reserves. It’s just delaying the inevitable.”

Sri Lanka’s finance minister, Basil Rajapaksa, told the Financial Times last month that the country was “trying all options” to avoid default. But its dollar-denominated bonds are trading at near half their face value, a level that implies a high probability investors will not be repaid in full.


“At these levels, a restructuring over the next 12 months should be the base-case scenario,” said Polina Kurdyavko, head of emerging market debt at BlueBay Asset Management, which holds some Sri Lankan bonds. “I find it difficult to see them muddling through this year.”

Sri Lanka first tapped bond markets more than a decade ago, taking advantage of western investors’ thirst for high-yielding assets as it sought to finance reconstruction following a civil war that ended in 2009.

It has since become an important player in global sovereign debt markets and has borrowed billions from countries including China and Japan. Sri Lanka has never defaulted and its successive governments have been known for a market-friendly approach.

President Gotabaya Rajapaksa’s government has said the country will survive the economic crisis by attracting more tourists and boosting exports, but many investors view this as unrealistic. It has also negotiated more than $1bn in relief from India and has asked China to restructure its debt.

The shortage of dollars has begun to inflict deep economic pain on the import-dependent nation. Cities including the commercial capital Colombo face regular electricity blackouts because of fuel shortages, while other essentials such as cement or milk powder are in short supply, resulting in double-digit domestic inflation.

“People don’t need to suffer like this,” said Roshan Rashid, the owner of a ceramics shop in Colombo. Prices of the tiles he buys have more than doubled after the government banned imports in an effort to save dollars.

Ahilan Kadirgamar, a sociologist at the University of Jaffna who works with rural co-operatives, said the economic crisis was “by far the worst kind we’ve been through since independence” in 1948.

He argued that the government needed to drastically reduce imports and prioritise distribution of food, medicine and other essentials. “Poverty is more visible now. People are finding it harder to cook one or two meals a day,” he said.

There are signs authorities are rethinking their approach. Rajapaksa told the FT that the government was “negotiating with everybody” including bondholders and was weighing an approach to the IMF.

Sri Lanka has previously entered 16 programmes with the IMF, but about half of those were not completed. Investors said the fund was likely to insist on a restructuring before providing assistance.

“If the IMF were to extend a programme, it would necessarily involve some level of restructuring,” said Daniel Alphonsus, a former adviser to Sri Lanka’s finance ministry under the previous government.

Manjuka Fernandopulle, an independent lawyer in Colombo who specialises in debt restructuring, said the “IMF is the only credible option”.

Recommended

Gillian Tett
Argentina’s IMF deal offers a warning on emerging market debt

But the presence of a wide range of creditors — particularly the heavy borrowing from China — could complicate attempts to restructure the debt.

In Zambia, where authorities are restructuring debts of about $15bn to secure an IMF loan, the process has been beset by accusations from bondholders that the government was favouring Chinese creditors.

Kurdyavko said: “It’s important to have all creditors on board. We want to avoid the dynamic where one group tries to push a certain angle to disadvantage the others.”

Despite the threat of default, some investors are contemplating whether now is the time to buy Sri Lanka bonds, as prices are so low. House said bondholders could end up receiving more than 50 cents on the dollar in a restructuring deal.

“It’s been a terrible credit for a long time, it’s now being priced as a terrible credit,” he said.

https://www.ft.com/content/09e1159f-9c45-4379-b862-98cb5e30a4da

It is very seriously risky to do new investments on the stock market for at least until the next several years. Unless you want to throw some money you reserved merely for gambling so that losing is not a issue at all.

Retailers who have already invested wisely  must be watchful everyday on their stocks and have patients.

Next International credit ratings could bring the CSE further down. Beware !!
Infact CSE activities will be more.. don't just scare people .. given the situation in the country this is the perfect oppertunity to invest . People who comment for creating this fear nothing but a evil plan to artificially bring the market down so that they can buy at low price
YEAH, IN CASE OF DEFAULT PEOPLE MAY RUSH INTO DOLLAR EARNING COUNTERS AND ONES WITH LARGE MARKET SHARE.

If the country goes to DEFFAULT there will be no value for rupee bro.  Everyday it will depreciate. Nothing else to talk after. No matter how much money is in the stock market.

Back to top  Message [Page 1 of 1]

Permissions in this forum:
You cannot reply to topics in this forum