A group of investors in Sri Lanka’s sovereign bonds has hired law firm White & Case LLP to advise on debt negotiations as the indebted island nation contends with a severe economic downturn and growing political unrest, WSJPro reported. The ad hoc group reportedly includes bondholders from BlackRock Inc. and Ashmore Group PLC. The group has yet to hire a financial adviser. Sri Lanka is facing a balance of payments crisis as the country’s foreign-exchange reserves have declined by more than half since the beginning of the COVID-19 pandemic. The nation spends foreign exchange to import many of the goods it needs to power its economy. Revenue from tourism, one of the country’s most important sources of foreign exchange, has declined in large part due to the pandemic. Meanwhile, remittances from Sri Lankans living abroad have dropped while a black market for foreign currencies has grown, economists say. The Sri Lankan government owed more than $16 billion to international bondholders as of April 2021, according to government data. It also owed around $3 billion directly to China as well as to Japan, and around $1 billion to India. Sri Lanka also has outstanding debt to institutional creditors such as the World Bank and the Asian Development Bank. In total, Sri Lanka’s public debt to gross domestic product ratio in 2021 hovered at just below 120%, according to International Monetary Fund projections.
