Sri Lanka has reached a crucial milestone in its long-awaited debt agreements with its bilateral lenders, including China, according to the government’s statement on Tuesday ( Jun 25 ).
According to government official Bandula Gunawardana, a group from the Treasury will travel to France on Wednesday to sign agreements with creditors.
After running out of foreign exchange, Sri Lanka defaulted on its international debt in April 2022, and Gotabaya Rajapaksa, the country’s next president, was forced to step down due to the unprecedented economic crisis.
Before the end of 2022, agreements stalled, but the government had hoped to reach a debt settlement with all of its debts.
Diplomatic lenders are responsible for 28.5 percent of Sri Lanka’s currently excellent US$ 37 billion in foreign debt, according to government information at the end of March.
China is the largest one diplomatic provider, accounting for US$ 4.66 billion out of a full of US$ 10.58 billion borrowed from other countries.
Japan is next, with US$ 2.35 billion, and India is third with US$ 1.36 billion.
Sri Lanka’s commercial borrowings include US$ 12.55 billion raised through the China Development Bank and US$ 2.18 billion raised through International Sovereign Bonds ( ISB ).
According to Gunawardana, speaks with ISB holders are still ongoing, adding that the island’s debt settlement with bilateral creditors was a significant success.
He stated that President Ranil Wickremesinghe would give details of the agreement to the public on Wednesday night in a statement to the audience.
The Cabinet of Ministers approved the terms of the creditors ‘ treaties, but Gunawardana declined to go into specifics, saying that the president did make that announcement on Wednesday.
The most recent US$ 336 million out of a US$ 2.9 billion save bundle, which was intended to assist Sri Lanka in recovering its bankrupted finances over the course of four years, was provided by the International Monetary Fund this fortnight.
This time, Sri Lanka will hold a presidential election, and opposition parties have pledged to renegotiate the terms of the IMF loan.
Peter Breuer, the IMF’s Sri Lanka objective chief, stated that they were open to other proposals from rival political parties, but that it was important to adhere to the standards set in the rescue.
Sri Lanka had made good progress, but the country was not out of the trees already, he said.