SL’s Debt Restructuring Gains Momentum with Indian Support amid Economic Reforms
October 09, Colombo (LNW): Sri Lanka recently highlighted the significance of Indian External Affairs Minister S. Jaishankar’s visit in advancing its debt restructuring with international sovereign bondholders.
Jaishankar’s one-day trip on October 4 marked him as the first foreign official to visit Sri Lanka since Anura Kumara Dissanayake took office as president on September 23.
Cabinet spokesman and Foreign Affairs Minister Vijitha Herath stated that India’s endorsement of the debt restructuring agreement as a bilateral creditor demonstrated compliance with the principle of comparative treatment in handling debt.
Prior to last month’s presidential election, on September 19, Sri Lanka announced a preliminary agreement with external commercial creditors to restructure approximately USD 17.5 billion of external commercial debt.
The country had previously declared its first sovereign default in April 2022, its first since gaining independence from Britain in 1948, due to depleted foreign exchange reserves.
This default halted debt servicing, preventing multilateral creditors and commercial lenders from extending new financing.
By July, Sri Lanka reached a debt restructuring agreement with international sovereign bondholders after lengthy negotiations with countries like China, India, France, and Japan.
Currently, Sri Lanka is in talks with the International Monetary Fund (IMF) for the next installment of the USD 2.9 billion bailout package, contingent on progress in external debt restructuring.
The IMF’s third tranche was released in mid-June, with the lender noting positive results from Sri Lanka’s economic reform efforts in August.
Herath mentioned that the bondholders sought confirmation from bilateral creditors on the principle of equal treatment in debt management.
He also addressed questions about Indian projects in Sri Lanka, including the Adani investment projects, stating that since the current government is a transitional one with parliamentary elections set for November, these matters were not discussed.
The ruling National People’s Power (NPP) had previously expressed intentions to annul the Adani wind power project. Herath emphasized that the government would reassess the project’s pros and cons, particularly due to concerns over high energy costs, after the next government is formed.
