A two-day parliamentary debate was postponed after the opposition demanded that agreements be delivered | (Photo: Wikipedia)
Sri Lanka has reached an agreement with international bondholders on debt restructuring after lengthy negotiations, Finance Minister Shehan Semasingher said on Thursday, calling it a “critical step” in the cash-strapped country’s efforts to repair its debt burden.
In a statement, State Minister for Finance Semasinghe said an agreement was reached on Wednesday on terms for restructuring, completing Sri Lanka’s debt restructuring process.
ISBs (International Sovereign Bonds) account for $12.5 billion of the total external debt of $37 billion. This agreement is a crucial step in our efforts to restore debt sustainability, Semasinghe said.
He added that the deal with private bondholders was subject to the approval of the official creditors’ committee of countries, including India.
“This is another milestone on our path to economic recovery and strengthening,” he said.
Officials said the expected agreed discount would be 28 percent, with an upfront payment to ISB holders from September this year.
Officials said this completes Sri Lanka’s debt restructuring process, a condition for debt sustainability under the ongoing $2.9 billion International Monetary Fund (IMF) bailout, which was extended for four years in March 2023.
It follows the completion of debt restructuring agreements with bilateral lenders, including India and China, in Paris on June 26. President Ranil Wickremesinghe described it as a major milestone in bolstering international confidence in the debt-ridden economy.
Sri Lanka declared its first-ever sovereign default in mid-April 2022 after running out of foreign exchange reserves. The suspension of debt servicing meant that multilateral creditor countries and commercial lenders could not provide new financing to the country.
The government faced criticism from the main opposition party after last week’s announcement of bilateral debt restructuring, which claimed the government had failed to find the best solution for the country.
President Wickremesinghe, who is also the Minister of Finance, dismissed the opposition’s criticism of debt restructuring as wrong, saying: No bilateral creditor would agree to a reduction in the principal amount. Instead, concessions are being granted through extended repayment periods, grace periods and lower interest rates.
A two-day parliamentary debate was postponed after the opposition demanded deals be struck.
Wickremesinghe said he would submit all agreements and documents related to the debt restructuring to a parliamentary committee once an agreement was reached with the private bondholders.
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First print: 04 Jul 2024 | 11:34 am IST