• Standard Chartered projects that Sri Lanka's nominal GDP will grow significantly, leading to a high probability of a principal haircut of less than 20% for GDP-linked bonds and a gradual depreciation of the rupee against the US Dollar, reaching Rs. 390 by the end of 2027. The bank also forecasts a strong cumulative real GDP growth of 14% from 2024-27, with specific recovery values and thresholds influencing bond repayment adjustments.

Standard Chartered sees a high probability of Sri Lanka receiving a principal haircut of less than 20% for GDP-linked bonds, given the expected nominal GDP growth. The bank projects a gradual and modest rupee depreciation versus the US Dollar, with the exchange rate reaching Rs. 390 by the end of 2027. Consequently, the 2024 GDP is projected to be between $89-91 billion, with nominal GDP surpassing $96 billion by the end of 2027. They assign a 75% probability of the average nominal GDP for 2025-27 exceeding $92 billion. The IMF forecast specifies an average 2025-27 nominal GDP threshold of $88.6 billion, with upward repayment adjustments if this threshold is surpassed. If the average nominal GDP exceeds $92 billion, the principal haircut on the bonds would be 20%, and at $96 billion, it would be 15%. Standard Chartered estimates probability-adjusted recovery values ranging from 57-71 at exit yields of 9%-13%, with a base case of 64 at an exit yield of 11%. They also anticipate real cumulative GDP growth from 2024-27, with 3% growth in 2024 and 3.5-4.0% growth over 2025-27, resulting in a cumulative real GDP growth of 14%. Accordingly, they assign an 80% probability that cumulative GDP growth will exceed the baseline of 11.1%.

MLB deal: Stan. Chart. sees high probability for less than 20% haircut | The Morning