By: Staff Writer

November 02, Colombo (LNW): Sri Lanka is aiming to complete its debt restructuring by the end of this year, with a goal to exit its default rating category soon afterward.

According to Central Bank Governor Nandalal Weerasinghe, the country’s efforts include formalities such as due diligence and documentation, necessary to finalize the debt exchange and secure investor involvement.

 This strategic plan, supported by the International Monetary Fund (IMF) and international advisors, reflects Sri Lanka’s commitment to addressing its financial difficulties after securing a debt restructuring agreement with official and private creditors, including China Development Bank.

The debt restructuring agreement with bondholders is a pivotal step, as it involves macro-linked bonds, which are tied to Sri Lanka’s economic growth.

This alignment of debt repayment with economic performance aims to make debt servicing sustainable and is a practical solution for a country recovering from economic setbacks.

Additionally, Governor Weerasinghe remains optimistic that an upgrade to Sri Lanka’s credit rating will follow shortly after restructuring, a critical step for the country’s reintegration into international financial markets.

 Meetings with rating agencies in Washington, D.C., indicate that Sri Lanka could initially be reclassified from its default status to a CCC rating or better, based on its financial outlook.

However, delays in the IMF’s third review of the $3 billion Extended Fund Facility (EFF) have posed additional challenges. Originally set for December, this review was postponed due to a delay in next year’s budget submission and an impending presidential election.

With parliamentary elections scheduled for November 14, the government has voiced a strong commitment to continue with debt restructuring.

A staff-level agreement with the IMF is expected by early December, but formal approval may be further delayed, as Sri Lanka needs to submit the new budget before the IMF Executive Board can complete the review process.

Sri Lanka’s approach to debt restructuring and efforts to stabilize its financial standing reflect a strategic focus on long-term economic recovery.

 While the delays in IMF proceedings may extend the timeline for an official credit rating upgrade, the government’s commitment to addressing structural debt issues is a promising sign for future economic stability.