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Thursday May 23rd, 2024

Sri Lanka agrees to state contingent factor in ISB exchange, ESG bonds also in play

ESG BONDS: ISB holders would take lower coupons if tax revenue and or other agreed IMF benchmarks are met

ECONOMYNEXT – Sri Lanka has agreed to issue bonds linked to economic performance (state contingent) when restructuring its defaulted sovereign bonds and had also indicated the willingness to consider a governance linked bond, a statement released by the island’s Finance Ministry said.

A committee representing bondholders had sent a revised proposal for a GDP linked bond (macro-linked bonds or MLB) in March with lower coupons for discussion at a meeting in London with Sri Lanka officials and advisors.

“During the Meetings, it was agreed that the primary basis for the discussions would be the Group’s March Proposal,” the statement said.

Sri Lanka had made a proposal with combined plain vanilla (A-bonds) and a state contingent adjustment factor (a bond which is based on economic performance) involving roughly a 28 percent hair cut, which was rejected by the bondholders.

Download statement here

The bondholders had made a fresh proposal in April, taking into account Sri Lanka’s suggestion for a downside scenario below IMF’s growth projections as well as an upside, also with around a 28 percent hair-cut but with a 1.5 percent upfront fee.

About 1.6 billion dollars of past due interest would be converted to plain bonds not linked to economic performance.

Sri Lanka has 12.55 billion dollars of bonds and estimated 1.6 billion dollars of missed coupons.

Sri Lanka had not agreed to the triggers suggested in the April proposal or the payments to be made under baseline and upside scenarios.

While the bondholders March proposal was deemed by the IMF not to meet its debt sustainability requirements, no assessment has been made on the April proposal.

Bondholders had also offered to propose a governance linked bond (Environmental, Social and Governance or ESG).

On the invitation of Sri Lanka, the bondholders had proposed an ESG bond which is linked to meeting IMF tax revenue targets and corruption disclosures as key peformance indicators (KPIs).

Coupons of the ESG bonds would fall in IMF targets are met.

A second round of talks are to be held later.

Default exchanges have earlier used bonds linked to economic performance but as separate value recovery instruments (VRI) or warrants.

ESG factors based on KPIs are common in green and blue bond type issues. (Colombo/Apr16/2024)

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Sri Lanka plans to expand Bingiriya export zone to 1,100 acres

ECONOMYNEXT – Sri Lanka is expanding an export processing zone in Bingiriya in Kurunegala and plans to link the area with Puttalam with roads and other infrastructure, Minister Bandula Gunawardana said.

A task force of ministerial secretaries will be appointed to carry out the tasks speedily, following a cabinet paper submitted by President Ranil Wickremesinghe said.

The Bingiriya zone already has 157 acres and another 282 acres is being developed by the Board of Investment, he said.

Steps would also be taken to acquire 666 acres.

There was no information whose lands would be acquired. (Colombo/May23/2024)

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Sri Lanka has power breakdowns amidst extreme weather

ECONOMYNEXT – The state-owned power utility, the Ceylon Electricity Board has reported over 36,900 breakdowns resulting in power interruptions to more than 300,000 consumers in the last three days due to inclement weather in the island, the power minister said.

“Additional service staff has been assigned to attend the breakdowns and the CEB management & service staff are working 24 hours to restore power to the affected consumers,” Minister of Power and Energy, Kanchana Wijesekera said on social media platform X (twitter).

Wijesekera said consumers could report power interruptions through the CEB hotline 1987, via SMS to 1987 with BD and the electricity consumer number to follow, or use the CEB Care app, or through http://cebcare.ceb.lk.

The South-East monsoon has seen floods, landslides and strong winds do damage to the utility provider’s infrastructure in the last week. (Colombo/May23?2024)

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Sri Lanka President calls for unity, sacrificing for a better tomorrow on Vesak day

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe has recalled a sermon from the Buddha about sacrificing for a better tomorrow, and called for unity to heal and rebuild the country, as Buddhists celebrate Vesak.

Buddhists celebrate Vesak as commemorating the birth, enlightenment and passing away of the Buddha.

“At this challenging moment, we as a nation should cultivate the same great zeal for enlightenment that Buddha exemplified, inspired by his sermon, “Maththasukha parichchaga- passé che vipulan sukhan” – to sacrifice today for a better tomorrow,” President Wickremesinghe said in his Vesak day message.

“We must remember the advice of Lord Buddha, “Sabbattha Sammanaso,” to treat everyone equally and ensure we put it into practice as a country. This is the greatest offering we can present to the Buddha on this Vesak day.

“Regardless of race, religion, caste, or political affiliation, we must all unite to heal and rebuild our country. ”

The full statement is reproduced below:

The Vesak festival is a profoundly sacred day for Buddhists worldwide, commemorating the Buddha’s birth, enlightenment, and passing. Buddhists in Sri Lanka, along with their brethren around the globe, celebrate Vesak with deep devotion. They spend this period engaging in religious observances and venerating the Buddha with fervent devotion.

At this challenging moment, we as a nation should cultivate the same great zeal for enlightenment that Buddha exemplified, inspired by his sermon, “Maththasukha parichchaga- passé che vipulan sukhan” – to sacrifice today for a better tomorrow.

We must remember the advice of Lord Buddha, “Sabbattha Sammanaso,” to treat everyone equally and ensure we put it into practice as a country. This is the greatest offering we can present to the Buddha on this Vesak day. Regardless of race, religion, caste, or political affiliation, we must all unite to heal and rebuild our country. The principles of Lichchavi Raja Dharmaya will guide us in this endeavour.

Let us keep in mind that the primary aim of the Vesak festival is to foster spiritual growth and character development in a world rapidly advancing physically. I wish everyone a blessed Vesak festival.

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