Lanka considering restructure of debt

COLOMBO, Aug 5 (Reuters): Sri Lanka is considering a restructure of local and sovereign debt, President Ranil Wickremesinghe said on Friday, as the island nation battles its worst financial crisis in its independent history.

The country is due to restart bailout talks with the International Monetary Fund (IMF) in August in the hope of securing $3 billion in funding. The government is working with its financial and legal advisers Lazard and Clifford Chance to finalise a plan to restructure overseas debt, including about $12 billion owed to bondholders.

"Have we got to look at local debt? That has far-reaching consequences," Wickremesinghe told a conference in Colombo. "The financial advisors are looking at both things."

Sri Lanka's central bank governor said on July 7 the country would not seek to restructure local debt.

The IMF has also previously warned countries of issues restructuring local debt, pointing to the impact on domestic banks.

"Restructuring domestic debt is like surgery - you only do it if you must, and you avoid it if it might do more harm than good," officials at the IMF said in a blog post in December.

Hit hard by the pandemic, which decimated the vital tourism industry, and by tax cuts pushed through by the government of then-President Gotabaya Rajapaksa, Sri Lanka is experiencing its worst economic crisis since independence from Britain in 1948.