Sri Lanka picks Lazard Clifford Chance as advisers for debt restructuring

Colombo: Sri Lanka has hired leading financial and legal advisory firms Lazard and Clifford Chance LLP to support its debt restructuring as the country is on the brink of bankruptcy and facing its worst economic crisis with an acute shortage of food, fuel and other essentials, according to a media report on Tuesday.

The Cabinet has approved a proposal by President Gotabaya Rajapaksa to hire the two firms as financial and legal advisers, Minister Bandula Gunewardene said.

They were recommended by a committee headed by Treasury Secretary Mahinda Siriwardena and Central Bank Governor Nandalal Weerasinghe and their fee will be around USD 5.6 million, EconomyNext website reported.

Weerasinghe said the committee had also negotiated the fee down.

Sri Lanka is near bankruptcy and has severe shortages of essentials from food, fuel, medicines and cooking gas to toilet paper and matchsticks. For months, people have been forced to stay in long lines to buy the limited stocks.

Sri Lanka has suspended repayment of about $7 billion in foreign loans due this year out of USD 25 billion to be repaid by 2026. The country’s total foreign debt is USD 51 billion.

Sri Lanka’s economic crisis has created political unrest with a protest occupying the entrance to the president’s office demanding his resignation continuing past 40 days. The crisis has already forced prime minister Mahinda Rajapaksa, the elder brother of the president, to resign on May 9.

An inflation rate spiralling towards 40 percent, shortages of food, fuel, and medicines, and rolling power blackouts have led to nationwide protests and a plunging currency, with the government short of the foreign currency reserves it needed to pay for imports.