Sri Lanka Achieves Debt Restructuring Milestone with External Creditors

Sri Lanka's Historic Debt Restructuring

Colombo, Sep 19 (PTI) Cash-strapped Sri Lanka announced significant progress in its economic recovery, reaching an in-principle agreement with external commercial creditors related to the restructuring of approximately USD 17.5 billion in external debts.

Key Highlights of the Agreement

• Agreements reached with holders of International Sovereign Bonds.
• Negotiations involved the Ad Hoc Group of Bondholders (AHGB) and the Local Consortium of Sri Lanka (LCSL).
• The two groups represent over 50% ownership of the Bonds.

Sri Lanka faced its first-ever sovereign default in mid-April 2022 due to depleted foreign exchange reserves, which halted debt servicing and new financing opportunities. The July agreement with international bondholders marked a turning point.

Upcoming Elections and Economic Implications

President Ranil Wickremesinghe indicated that the country's bankruptcy status would officially end, potentially boosting his re-election efforts ahead of the September 21 elections. The agreements promise enhanced debt relief compared to previous frameworks established in July.

Moreover, Sri Lanka has finalized terms with China Development Bank (CDB) regarding USD 3.3 billion in sovereign debt. Ongoing discussions with the International Monetary Fund (IMF) link external debt restructuring to a critical USD 2.9 billion bailout package.

Conclusion

The release of the third tranche of the IMF bailout equates to positive indications of Sri Lanka's economic reform results.