Sri Lanka nearing debt restructuring: President Ranil Wickremesinghe

Colombo: Sri Lanka is close to securing a statement of agreement from its external creditors on debt restructuring that will enable the IMF to conclude its first review of the USD 2.4 billion bailout facility approved in March this year, President Ranil Wickremesinghe said on Wednesday.

Sri Lanka was hit by its worst economic crisis in history when the country's foreign exchange reserves fell to a critical low and the public came out on the streets to protest the shortage of fuel, fertilisers and essential commodities.

On Wednesday, President Wickremesinghe told the Sri Lanka Economic Summit 2023 here that, "China's Exim Bank was the first to provide Sri Lanka with the agreement in principle. We expect the official creditor committee to provide a similar agreement." In October, the Sri Lankan government confirmed that it had concluded a preliminary deal with China on restructuring its debts to Beijing, seen as a "big step" in the cash-strapped country's economic recovery.

China holds about 52 per cent of Sri Lanka's USD 46 billion external credit. Both nations reached an agreement on the key principles and indicative terms of debt treatment with the Export-Import Bank of China.

The discussions with private creditors are also continuing, Wickremesinghe said.

The debt restructuring and related financial assurances would enable the International Monetary Fund to conclude its first review of the USD 2.4 billion bailout facility approved in March this year.

The second tranche of the 4-year facility of USD 330 million dollars will be coming thereafter.

The slow progress held up the review of debt restructuring talks.

The governor of the Central Bank Nandalal Weerasinghe said last week that the release of the second tranche would trigger support from the Asian Development Bank and the World Bank alongside budgetary support from the IMF.

Wickremesinghe announced that Sri Lanka’s current bankrupt state of its economy would cease in December.

Sri Lanka declared bankruptcy in April 2022 which saw the ouster of the Gotabaya Rajapaksa government mid-year. The island nation announced its first-ever sovereign default since gaining independence from Britain in 1948.

The Rajapaksas and their fiscal hierarchy were found responsible for the economic downturn by the highest court in fundamental rights petitions.