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Verité Research's Governance-Linked Bond (GLB) proposal, featured prominently in recent discussions between the Sri Lankan government and external commercial creditors in London, introduces a novel mechanism to align debt repayment with governance improvements. Structured around two key performance indicators (KPIs) - the tax revenue to GDP ratio and reforms outlined in the IMF program - the GLB aims to incentivize fiscal responsibility and governance enhancements. Since its introduction to the Sri Lankan government in April/May 2023 and subsequent presentation to bondholders in September 2023, there has been significant interest from stakeholders at both levels, signaling potential for innovative debt instruments to drive positive change.
Verité Research's Executive Director, Nishan de Mel, underscores the simplicity and efficacy of the GLB approach in his op-ed published in the Daily Mirror last December. By linking bond repayments to measurable governance metrics, the GLB offers a pragmatic solution to the challenges facing Sri Lanka's fiscal management. With its potential for fostering accountability and incentivizing reforms, the GLB represents a promising avenue for addressing debt sustainability concerns while promoting good governance practices. Further insights into this groundbreaking proposal will be unveiled at DebtCon7 in Paris on May 30th, underscoring its significance in the global dialogue on debt management and governance innovation.
For further reading on the Governance-Linked Bond proposal by Verité Research:
