Sri Lanka solidified long-awaited agreements with its lenders yesterday, a move economists believe will foster positivity and help the nation emerge from selective default.

The agreements with bilateral creditors are viewed as crucial for enhancing the sustainability of Sri Lanka’s external debt, signalling a positive direction for the country’s financial stability. “Interest payments will be lowered going forward, and there will be maturity extensions on principal payments. 

This will provide much-needed breathing space in managing our external sector outflows,” said Murtaza Jafferjee, Chairman of the Advocata Institute, to Mirror Business.

This development is expected to pave the way for the resumption of stalled infrastructure projects, such as phase 1 of the Central Expressway and the Airport.

Senior economist Prof. Sirimal Abeyratne also noted that finalising the agreements will help the crisis-struck island nation unlock its potential and achieve sustainability.

Once Sri Lanka finalises the deal with bondholders, it will be able to declare itself out of bankruptcy. This signifies the nation’s capability to handle its expenditure and manage its debt obligations, repaying less over a longer duration.

However, Prof. Abeyratne cautioned that merely emerging from bankruptcy is insufficient.

Economist Talal Rafi emphasised that concluding the debt restructuring is beneficial as it reduces economic uncertainty to some extent.

“However, the more important thing is to see if we got a good deal and a deal that is sustainable, as these repayment terms will affect Sri Lanka for years to come,”
 Rafi noted.