INSUBCONTINENT EXCLUSIVE:
The International Monetary Fund (IMF) board approval for Sri Lankas Extended Fund Facility (EFF) is now expected in the second quarter of
2023, Standard Chartereds Global Research report revealed.Accordingly, the prediction was made owing to delays in securing financial
assurances from its bilateral financial institutions, the report read, adding that this might even more postpone settlements with commercial
lenders, which are also expected to be pushed back to the second half of 2023
As a result, we expect a restructuring deal to be reached only by the end of 2023
Attaining the IMFs qualitative and quantitative targets, consisting of the prompt restructuring of commercial debt, might posture challenges
and potential disrupt the IMF program , the report read.Moroever, it was specified that Sri Lankas economy is likely to agreement in 2023,
while the external sector has improved due to import contraction.Meanwhile, solvency and liquidity risks within the financial-sector are
likewise building, in addition to the looming domestic financial obligation restructuring, it stated.The report read as follows: IMF
approval likely to get pressed back to Q2-2023IMF board approval for Sri Lankas Extended Fund Facility (EFF) programme has been postponed as
settlements with bilateral lenders have actually taken longer than anticipated
We now anticipate board approval to take place in Q2-2023 (versus Q1 formerly), given hold-ups in protecting funding assurances from
bilateral financial institutions
This could even more delay negotiations with business creditors, which we expect will be pushed back to H2
As a result, we expect a restructuring offer to be reached only by the end of 2023
Achieving the IMFs qualitative and quantitative targets, consisting of the timely restructuring of commercial debt, might pose challenges
and prospective disrupt the IMF programme.Against this background, we expect Sri Lankas economy to contract an additional 1.0% in 2023,
following an estimated 7% contraction in 2022
This would make accomplishing a primary deficit target challenging
We now anticipate a primary deficit of 2.2% of GDP in 2023, versus the 0.7% target set by the IMF; consequently additional pressing our 2023
financial deficit forecast to 11.0% from the previously estimated 9.0%
The suspension of external debt service and the suppression of imports have helped to stabilize the external accounts; a gradual healing in
remittances and tourism circulations has actually also assisted
However, we are concerned about the liquidity and solvency of the banking sector, provided its exposure to a weak economy and sovereign
debt.We revitalize our financial obligation restructuring model to reflect our latest views on the economy and the restructuring timeline
Based on an exit yield of 11-15%, we compute a healing worth of 22-33 for the Eurobonds
Under our base-case presumption of a 13% exit yield, we approximate a recovery value of 28
Considering that our reasonable value price quotes resemble where the SRILAN curve is presently trading, we stay Market weight.
