All smiles following the MoU signing between Sri Lanka and the Official Creditor Committee of bilateral lenders led by France, India and Japan as co-chairs

• Agreements cover roughly US$ 10bn of debt including China 
• Full clarity still lacking on details of the agreements
• President Wickremesinghe in his official address to the nation says will be able to defer all bilateral loan installment payments until 2028

Sri Lanka yesterday marked a significant milestone in its economic recovery journey as it brought to close more than yearlong talks with the bilateral lenders.

The island nation was able to pull off deals for roughly US$ 5.8 billion worth of debt it owed to the lenders in Paris. A similar deal was signed with China’s Export Import Bank to restructure US$ 4.2 billion of its debt.

The country’s State Finance Minister Shehan Semasinghe shared the ‘happy news’ the entire nation was waiting for on social media platform X (formerly Twitter) as he said he was pleased to announce the final agreement on debt restructuring between Sri Lanka and the Official Creditor Committee.

While full clarity is still lacking in what constitutes the US$ 5.8 billion in bilateral debt, Sri Lanka owes US$ 4.8 billion to Paris Club lenders which includes roughly US$ 2.7 billion
to Japan.

The non-Paris Club lenders hold another US$ 6.3 billion debt of which China and India owns US$ 4.3 billion and US$ 1.6 billion each. 

Besides, Sri Lanka also owes another US$ 3.2 billion to China Development Bank which comes under commercial debt.

While Sri Lanka may be able to clinch a deal with China Development Bank too given the developments that took place yesterday, the country is yet to find common ground with its International Sovereign Bond holders to whom Sri Lanka owes roughly US$ 12.55 billion.

The breaking news by the State Minister Finance was followed by President Ranil Wickremesinghe’s address to the nation where he asserted “Sri Lanka won!”

“With these agreements, we will be able to defer all bilateral loan installment payments until 2028. Furthermore, we will have the opportunity to repay all the loans on concessional terms, with an extended period until 2043,” President Wickremesinghe said.

In 2022, Sri Lanka spent 9.2 percent of its gross domestic product (GDP) on foreign debt payments. With the new agreements, Wickremesinghe said it will pave the way for the island nation to maintain debt payments at less than 4.5 percent of GDP between 2027 and 2032. 

The government’s annual gross fiscal requirement was 34.6 percent of GDP in 2022. Due to these agreements, this requirement will decrease by more than 13 percent by the period of 2027-2032, Wickremesinghe said.
In April 2022, Sri Lanka officially declared its inability to meet its debt obligations.

Following this declaration, international business transactions with Sri Lanka came to a halt.

Wickremesinghe acknowledged the journey to this point has not been easy and the nation has traveled a difficult and arduous path. 

“Our ministers and officials have worked tirelessly towards this goal. The majority of our citizens have supported us with patience and resilience, enduring various hardships. Despite the ongoing challenges, we have persevered,” he said.