Sri Lanka reaches final debt restructuring agreement with international creditors

Sri Lanka has successfully reached a final restructuring agreement for USD 5.8 billion of debt with its bilateral lenders’ Official Creditor Committee (OCC) in Paris, France on Wednesday (June 26).

The announcement was made during the Paris Forum 2024, marking a significant milestone in the country’s efforts to stabilize its economy.

The agreement provides substantial debt relief, allowing Sri Lanka to allocate funds to essential public services and secure concessional financing for its development needs, the President’s Media Division (PMD) said.

“We are pleased to announce that the final agreement has been reached on debt restructuring between Sri Lanka and the Official Creditor Committee on the sidelines of the Paris Forum 2024 in Paris, France,” confirmed Sri Lanka’s State Minister of Finance Shehan Semasinghe.

In addition to the agreement with the OCC, Sri Lanka is in the process of signing bilateral debt treatment agreements with the Export-Import Bank of China. These agreements are expected to further stabilize the country’s financial situation.

“On behalf of Sri Lanka, I would like to sincerely thank the OCC chairs – France, India, and Japan – as well as Export Import Bank of China for their leadership in this process,” Semasinghe stated in a post on ‘X’ (formerly Twitter).

He commended the OCC Secretariat for their dedication to resolving Sri Lanka’s debt crisis and achieving this significant milestone.

Complete ‘X’ message from State Minister of Finance Shehan Semasinghe:

We are pleased to announce that the final agreement has been reached on debt restructuring between Sri Lanka and the Official Creditor Committee on the sidelines of the Paris Forum 2024 in Paris, France. Today we are also in the process of signing bilateral debt treatment agreements between Sri Lanka and Export Import Bank of China.

On behalf of Sri Lanka , I would like to sincerely thank the OCC chairs – France, India, and Japan – as well as Export Import Bank of China for their leadership in this process, as well as all OCC members for their unwavering support. I also commend the OCC Secretariat for their dedication to finding a resolution to our debt crisis and achieve this significant milestone, which will enhance confidence in our economy and foster growth.

I reiterate that the unwavering commitment and leadership of President Ranil Wickremesinghe have been instrumental in steering our nation towards this milestone achievement.

President Ranil Wickremesinghe’s leadership was highlighted as instrumental in reaching this agreement.

The President had updated his Cabinet on the debt restructuring late Monday, with the Cabinet subsequently approving the debt restructuring framework. Cabinet spokesman Bandula Gunawardana assured that the details of the agreement would be presented to parliament to ensure transparency.

The debt restructuring deal will enable creditor nations to resume lending to Sri Lanka, whose economy crashed in 2022 due to a fall in foreign exchange reserves, leading to a default on its foreign debt. Sri Lanka’s bonds saw a slight uptick of 0.2-0.3 cents in late Asian trading, maintaining the gains made since February.

The finance ministry had earlier indicated that the debt restructuring agreement covered approximately $5.9 billion of outstanding public debt, involving extending the maturity of long-term borrowings and reducing interest rates. Most of this debt is owed to Japan and India, who chair the OCC alongside France.

Despite this progress, Sri Lanka still needs to finalize an agreement on $12.5 billion owed to private bondholders and secure a final deal with the Export-Import Bank of China on $4.2 billion in loans. With the support of a $2.9 billion bailout package from the International Monetary Fund, Sri Lanka’s economy is projected to grow by 3% in 2024 after two years of contraction.