Sri Lanka Secures Debt Relief to Boost Economic Stability

The International Monetary Fund (IMF) announced that Sri Lanka reached agreements with China and other nations to restructure $10 billion in debt, marking a significant step towards debt sustainability. The island nation aims to finalize deals with private creditors soon, extending repayment to 2043 and looking for parliamentary approval.

The International Monetary Fund (IMF) said on Thursday that Sri Lanka's agreements with China and other creditor nations to restructure about $10 billion in bilateral debt took the island nation a step closer towards restoring debt sustainability.

"We hope that there will be swift progress on reaching agreements with external private creditors in the near future," Peter Breuer, IMF's senior mission chief for Sri Lanka, said in a statement. Sri Lanka still needs to convince bondholders to restructure about $12.5 billion in international bonds, on which the global lender said it hopes to see swift progress in the near future.

Sri Lanka signed agreements with China and other creditor nations to restructure about $10 billion in bilateral debt on Wednesday. The move brings Sri Lanka closer to finalising a debt restructuring process that began in September 2022 after its reserves hit record lows and forced the island nation to default on its foreign debt for the first time.

Sri Lanka will seek approval from its parliament on the deals on July 2, President Ranil Wickremesinghe said addressing the nation after the agreements were inked. The agreements allow Sri Lanka to delay repaying its bilateral creditors till 2028 and extends the repayment period up to 2043, he added.

Finalisation of the deals formed part of several key conditions set by the IMF under a $2.9 billion bailout programme signed in March 2023 that has helped the island nation tame inflation, stabilise its currency, and improve government finances. Sri Lanka's economy is expected to grow by 3% in 2024, recovering after a 2.3% contraction last year.