Courtesy Hiru News

Sri Lanka’s dollar bonds and stocks have dropped following the election of leftist candidate Anura Kumara Dissanayake as President, sparking concerns about the future of the nation’s bailout by the International Monetary Fund (IMF) and ongoing debt deals according to a report from Bloomberg.

Bonds set to mature in March 2029 fell by 3.1 cents to 50.2 cents on the dollar, marking the largest decline in about two years. The S&P Sri Lanka 20 Index of blue-chip stocks also slid by 2% in early trading, though the rupee remained steady.

Dissanayake has pledged to renegotiate the $3 billion IMF bailout, which includes unpopular spending cuts and tax increases. Sri Lanka’s 2029 dollar bonds have experienced a nearly 15% drop this quarter, a sharp contrast to last year when they delivered a return of nearly 70%, one of the strongest performances in emerging markets.

Analysts have expressed concerns over whether Dissanayake’s administration will maintain the agreement reached with creditors or push them back to the negotiating table. However, Dilshan Wirasekara, chairman of the Colombo Stock Exchange, expressed confidence that the new president will broadly adhere to the IMF program, with only a few debt restructuring parameters likely to be renegotiated.

Sri Lanka recently reached a preliminary agreement with bondholders to restructure $12.6 billion in debt. While some members of Dissanayake’s National People’s Power coalition had opposed the terms of the restructuring, the markets have largely factored in the election results.

Source Bloomberg and Foreign Agency reports