The Sri Lankan government announced that it has reached an agreement with its foreign private creditors to restructure the $12.5 billion of its external debt that they hold. The agreement incorporates a novel instrument: a macro-linked bond for which the payout is linked to the GDP performance of the debtor country. These bonds are to be issued in exchange for existing bonds, incorporating a suitable haircut aimed at restoring debt sustainability. However, the terms of those bonds may end up delivering signifi cant gains for foreign creditors without any for Sri Lanka.
Economic and Political Weekly.
Dr Chandru Chandrasekhar
Advisory Board Member, IPE
