A spokesman for the Sri Lankan government said on Tuesday, September 13, that the financial advisory group Lazard has begun talks with India, China, and Japan about restructuring Sri Lanka’s debt. This comes as the crisis-stricken island nation seeks a bailout from the International Monetary Fund (IMF).
Sri Lanka hired Lazard and the international law firm Clifford Chance in May to help the government restructure its debt, which is estimated to be anywhere from US$85 billion to well over US$100 billion.
The IMF said earlier this month that it had reached a preliminary agreement with Sri Lanka for a loan of about US$2.9 billion. But for the deal to go through, the country’s three biggest international lenders—China, India, and Japan—will have to forgive some of its debt.
Acting cabinet spokesperson Ramesh Pathirana said about Lazard, “They are in the process of talking to India, China, and Japan, mostly to make sure we come to some kind of consensus.”
“We’ll keep our fingers crossed that we can agree on something.”
Sri Lanka owes about US$13 billion to these three countries, but China is Sri Lanka’s biggest bilateral creditor.
A government source told Reuters that Sri Lanka is also likely to reach out to private creditors later this week. These creditors hold about $12 billion in bonds.
“The government plans to start talking about debt restructuring with the ambassadors of China, the US, Japan, and India next week,” a source said, declining to give his name because he was not allowed to talk to the media.
Sri Lanka is in the middle of its worst financial crisis in 70 years, which has left it with only a small amount of foreign currency to pay for imports of fuel, food, and medicine.