• If Sri Lanka enhances transparency, reduces corruption, and increases government revenue, the proposed 28 percent bond haircut could rise to 35 percent, with the potential for further adjustments based on economic growth rates, according to Central Bank Governor Dr. Nandalal Weerasinghe.

If Sri Lanka improves transparency, reduces corruption, and boosts government revenue as suggested by commercial creditors, the proposed 28 percent haircut on bonds could increase to around 35 percent, according to Central Bank Governor Dr. Nandalal Weerasinghe. He emphasized that the key is achieving relief comparable to what bilateral parties receive, even if it’s not a haircut. Dr. Weerasinghe noted that if bilateral creditors do not offer a haircut, they may provide similar relief, and according to the IMF, achieving sustainability with a 28 percent haircut is feasible if the economy performs as projected. He explained that if the country grows at an average of 3 percent, it can meet this requirement, but if growth reaches 5 percent, the haircut could reduce from 28 percent to 20 percent, as higher growth rates would allow a portion of increased government revenue to be allocated to bondholders. Conversely, if growth falls below 3 percent, there is a possibility of negotiating a higher haircut, potentially reaching 35 percent or 40 percent, providing a safeguard against unexpected economic slowdowns.

Improved transparency could lead to higher haircut: Dr. Weerasinghe | Daily Mirror