Sri Lanka Nears Completion of Bond Restructuring Amid Balancing Act with India and China

Sri Lanka is on the verge of completing discussions with international bondholders for restructuring its massive debt, Foreign Minister Ali Sabry announced. The nation aims to balance its diplomatic relations with both India and China. Economically, the restructuring is expected to save $8 billion, promote development projects, and spur growth.

Sri Lanka is poised to finalize talks with international bondholders regarding its debt restructuring within weeks, Foreign Minister Ali Sabry revealed on Tuesday. This milestone is crucial for the nation's recovery from its most severe financial crisis in decades. Sri Lanka is also strategically balancing its relationships with major creditors and investment partners India and China, Sabry emphasized.

"Hopefully within a couple of weeks," Sabry mentioned at the Reuters NEXT conference in Singapore, indicating that the bond restructuring should be complete by the end of the month. This agreement includes a deal with some bondholders to move forward on restructuring approximately $12.5 billion in international bonds, pending approval from remaining private creditors and the IMF. The country, burdened with $37 billion in external debt, reached an agreement with official creditors including Japan, China, and India in June to restructure $10 billion in debt.

The anticipated debt rework is projected to save Sri Lanka $8 billion through write-offs and delay capital repayments by at least four years. This financial leeway will enable the restart of around a dozen stalled, foreign-funded development projects, boosting economic growth, according to Sabry. Continued reforms such as property taxes, state-owned company revamps, and improved dollar reserves are essential for maintaining economic stability.

(With inputs from agencies.)