LONDON (Reuters) - Sri Lanka launched its long-awaited bond swap on Tuesday, a key step to completing its $12.55 billion debt restructuring and enabling its fragile economic recovery to continue.
Bondholders have until December 12 to vote in support of the proposal, which would see them swap existing bonds for a set of new issues, including one where payout is adjusted according to GDP-growth - a so called macro-linked bond.
The island nation defaulted on its foreign debt for the first time ever in May 2022, buckling under a high debt burden and dwindling foreign exchange reserves.
The deal, which the then-government agreed with bondholders just two days before a September election, will - once approved - reduce the government's debt service payments by $9.5 billion over the period of the IMF programme, the government said in a statement.
"Today's official announcement of the commencement of the International Sovereign Bond restructuring with private creditors marks an important milestone for Sri Lanka," President Anura Kumara Dissanayake said in the statement.
The country's bonds had been on a rollercoaster around the election, in which Marxist-leaning Dissanayake sweep to power on pledges to cut taxes and revisit the IMF programme, stoking fears that he might seek to revisit the deal struck with the outgoing government. However, Dissanayake instead signalled willingness to conclude the deal.