The government has successfully negotiated a debt restructuring agreement with its bilateral creditors, securing delayed payment on interest and a postponement of the maturity date.
However, the creditors have firmly rejected any reduction in the principal amount owed.
This agreement was formalized in a memorandum of understanding (MoU) between the government and the bilateral creditors, facilitated by the official creditor committee.
The MoU outlines the broad framework for the debt restructuring, though the process is not yet finalized. The government will need to engage with each individual creditor country to finalize the restructuring of the $5.4 billion debt.
The implications of this agreement on discussions with Eurobond holders remain uncertain as commercial creditors (Eurobond holders) are advocating for uniform treatment with bilateral creditors (the comparability of treatment principle). This may then affect the Government’s negotiations for a 30%-40% cut in the principal of bondholders.
Some analysts suggest that, despite the relief on interest payments, the government should establish an escrow account to set aside funds in preparation for future payments.
This approach would ensure that the government is ready to meet its obligations when the deferred payments come due.