Sri Lanka seals major debt restructuring agreements

Sri Lanka completed comprehensive debt restructuring agreements with significant bilateral creditors, China Export and Import (EXIM) Bank and the Official Creditor Committee (OCC) today (June 26), the President’s Media Division (PMD) said.

Beyond the short-term financial gains, the agreements open up new avenues for bilateral finance, which is necessary to restart important infrastructure projects, PMD added.

Adding that, the PMD further noted that it is expected that this influx of foreign investment will boost the creation of jobs and economic resilience by energizing industries like construction.

“This restructuring provides up to 92% relief on debt service payments during the IMF program, offering substantial fiscal breathing room crucial for prioritizing public services and stimulating economic growth,” noted the PMD citing a senior government official.

Moreover, after agreements with commercial bondholders are finalized, the successful restructuring paves the way for future increases in Sri Lanka’s credit ratings.

Improved credit ratings are anticipated to lower foreign funding costs and make it simpler to access global capital markets, supporting more widespread economic growth and stability.

The restructuring process was directed by the IMF’s Debt Sustainability Analysis (DSA), which established the essential debt relief measures in line with Sri Lanka’s fiscal recovery goals.

All creditors, notably China Exim Bank and the OCC, committed to extending capital grace periods, lowering interest rates considerably, and extending maturity periods.

By taking these steps together, Sri Lanka is able to reduce its immediate debt service commitments and free up funds for public spending that is vital to the country’s economic growth and stability, the PMD said.

The agreements, which have a combined value of USD 10 billion, include restructuring plans with significant bilateral lenders that are overseen by the OCC, which is co-chaired by France, Japan, and India.

Australia, Austria, Belgium, Canada, Denmark, Germany, Hungary, Korea, the Netherlands, Russia, Spain, Sweden, the United Kingdom, and the United States of America are among the committee's notable members.