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Sri Lanka to sign debt restructuring agreements with India and Japan

Sri Lanka is set to sign agreements to restructure its bilateral debt with India and Japan on Wednesday. This news was confirmed by Foreign Minister M.U.M. Ali Sabry, who mentioned that President Ranil Wickremesinghe had updated the Cabinet about the progress on Monday.

Last week, Cabinet spokesman Minister Bandula Gunawardana announced that Sri Lanka is ready to sign agreements with its bilateral creditors. This move is expected to pave the way for resuming loan-funded projects in the country.

Sri Lanka has been in talks with the Paris Club, India, and China to restructure its debt since it declared a sovereign default in 2022. Preliminary agreements were reached last year. During the peak of its economic crisis, India provided crucial assistance worth over USD 4 billion, helping Sri Lanka cope with a severe shortage of foreign exchange and essential supplies.

With financial assurances from India and other creditors, the International Monetary Fund (IMF) approved financing in March last year, which has helped Sri Lanka start its recovery process.

The debt restructuring plan includes extending the maturity dates and implementing a moratorium without reducing the principal amount, while maintaining the ‘Net Present Value’ under a specific formula. Earlier this year, President Wickremesinghe informed Parliament that the restructuring might involve a moratorium until December 2027, with repayments extending until 2042.

Sri Lanka’s Information Office announced that President Wickremesinghe will make a special national address on Wednesday evening, likely focusing on the debt restructuring.

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Last Updated: 19th Jul 2024