Bloomberg reports that investors in Sri Lankan dollar bonds are scrambling to sell their holdings due to mounting political instability ahead of the upcoming presidential election. This rush to sell has been triggered by fears that a change in political leadership could derail ongoing debt restructuring talks, which are vital for stabilizing Sri Lanka’s struggling economy.
The uncertainty stems from the positions of opposition leaders, particularly National People’s Force candidate Anura Kumara Dissanayake, who has voiced his intent to renegotiate the terms of the program with the International Monetary Fund (IMF). His opposition to the current debt restructuring framework, which was agreed upon with multilateral lenders, has heightened investors’ concerns.
This has led to a sharp increase in the selling of bonds, with many investors worried that any changes to the IMF program or the restructuring plan could jeopardize the country’s ability to manage its foreign debt. The Sri Lankan government has been relying on these agreements to address the country’s ongoing financial crisis, which has seen inflation, currency depreciation, and economic contraction.
The anxiety over political and economic uncertainty is further compounded by concerns that delays or changes in debt restructuring could worsen Sri Lanka’s ability to meet its financial obligations. With the election fast approaching, investors fear that the country could become even more unstable, driving them to liquidate their positions while they still can.
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