COLOMBO / LONDON – Sri Lanka has appointed Lazard and Clifford Chance, respectively, as financial and legal advisers to represent the government in negotiations with international lenders, three sources familiar with the situation said on Monday.
Sources are reluctant to reveal the name as the talk is private.
A spokesman for Clifford Chance declined to comment. Lizard did not immediately respond to a request for comment.
A cabinet spokesman did not respond to a request for comment outside business hours.
The country is heading for debt restructuring of more than $ 12 billion on foreign debt as it sinks into deep economic and political crisis.
The move comes after the island nation defaulted on a bond payment last week due to the expiration of the 30-day grace period.
The combination of Japanese, Chinese and Indian debt, piles of bonds held by foreign investors and discussions on the International Monetary Fund (IMF) bailout have added to the South Asian country’s worst financial crisis since independence in 1948.
The country’s economy of 22 million people has collapsed after a massive tax cut by President Gotabaya Rajapaksa in 2019, and Covid-19 has hit the lucrative tourism industry and Colombo is struggling to pay for essentials such as fuel, medicine and food.
“The most important issue so far is the government’s political will and ability to set the preconditions for the IMF program,” said Peter Atanasov, Gramercy’s co-head of sovereign research and strategy.
“Governments are often willing to do the necessary things when their backs are completely against the wall.”
Other factors include the high price of subsidized fuels and the decision to ban the import of chemical fertilizers, which has devastated the agricultural sector.
Rothschild & Co, one of the largest holders of Sri Lankan sovereign dollar bonds, was appointed as financial advisor and White & Case as legal adviser. (Reporting by Georgina do Rosario and Udita Jayasinghe; Additional reporting by Mark Jones; Editing by Rodrigo Campos and Nick Jiminski)