Common platform for Sri Lanka creditors to be announced by India, France, Japan

Washington DC: Japan, India, and France on Thursday formed a joint forum for talks with bilateral creditors to coordinate Sri Lanka's debt restructuring, a step they believe would serve as a model for resolving the debt problems of middle-income economies.

The participation of China, Sri Lanka's largest bilateral creditor, in the proposal made by Japan, the G7 chair for this year, to convene a series of meetings among Sri Lanka's creditors, remains uncertain.

"To be able to launch this negotiation process gathering such a broad-based group of creditors is a historical outcome," Japanese Finance Minister Shunichi Suzuki told a briefing, Reuters reported.

"This committee is open to all creditors," he said, voicing hope China will join in the effort.

Emmanuel Moulin, director general of the French Treasury, stated at the briefing that the group was prepared to conduct the first round of negotiations "as soon as possible."

The governor of Sri Lanka's central bank had earlier this week said that establishing a single forum for discussions would be a good step that would make it simpler to discuss and share information.

"I hope the creation of this platform will become a model case" for restructuring debts of middle-income countries, Suzuki said.

Masato Kanda, the top foreign policy advisor for Japan, told reporters that the group has invited all of Sri Lanka's bilateral creditors, including China, and that it intends to begin the first round of negotiations as soon as practical.

The 22 million-person island nation this month received a $2.9 billion package from the International Monetary Fund to help it reduce its astronomical debt load. However, the G20's common framework for debt remedies, which primarily applies to low-income countries, prevented the middle-income economy from applying for relief.

Major economies were forced to devise an alternate plan as a result, which gave rise to the new platform.

According to official government figures, Sri Lanka owes $7.1 billion to bilateral creditors, of which $3 billion is owed to China, $2.4 billion to the Paris Club, and $1.6 billion to India.

Additionally, the government must renegotiate $2.7 billion in additional commercial loans as well as more than $12 billion in Eurobond debt with overseas private creditors.

Sri Lanka began negotiations this month to restructure a portion of its domestic debt, and it intends to complete the agreement by May.