Sri Lanka's Historic Debt Restructuring Success

Sri Lanka has successfully reached an agreement with its bondholders to restructure $12.55 billion in international bonds. The agreement involves swapping defaulted bonds for new instruments, including governance-linked bonds. This move is part of Sri Lanka's efforts to manage its debt crisis and improve economic stability.

Sri Lanka announced on Friday that its bondholders have agreed to a significant restructuring plan involving $12.55 billion in international bonds, marking a crucial step toward resolving its debt situation.

The preliminary results indicated that 96% of the bondholders agreed to the proposal, which entails swapping defaulted bonds with new fixed-income instruments. These new bonds include governance-linked options offering interest rate reductions contingent on meeting specific targets, along with others tied to economic performance indicators.

Successfully concluding this bond exchange will place Sri Lanka among countries like Ghana, Ukraine, and Zambia, who have restructured their bonds this year. The move is expected to save $9.5 billion in debt service payments over four years under Sri Lanka's IMF program and reduce bond coupons from 31% to 4.4%.

(With inputs from agencies.)