SL still has US$ 3.2bn in external debt to settle this year despite standstill

• The obligations stem from foreign currency loans, securities and deposits 
• Consist of US$ 2.7bn in principal and US$ 447mn in interest
• Debt suspension doesn’t seem to apply on CB swap facilities
• Under normal circumstances SL has about US$ 6bn total debt repayment for a year
• SL announced debt standstill in April, 2022 after nearly exhausting foreign reserves

Sri Lanka appears to be still having roughly US$ 3.2 billion worth foreign currency obligations to be settled this year even after announcing a debt standstill on selective debt last year until creditors agree to restructure them.

The data made available by the Central Bank showed the country is still required to repay external obligations stemming from foreign currency loans, securities and deposits up to US$ 3,185 million in 2023 consisting of US$ 2,738 million in principal payments and US$ 447 million in interest. 

The government announced a debt suspension in April last year as the country’s foreign currency reserves nearly exhausted. 

However, the debt suspension applied only to select debt categories, owed predominantly to bilateral partners and commercial creditors for the debt raised through International Sovereign Bonds. 

The Central Bank said this US$ 3.2 billion payable in 2023 consists of, “ projected short-term net drains after the announcement of the suspension of selected external debt servicing by the government for an interim period”.

The debt suspension doesn’t seem to apply on swap facilities the Central Bank obtained from its friendly central banks and multilateral funders.

Under normal circumstances, Sri Lanka has about US$ 6.0 billion total debt repayments for a year at least for the next 3-4 years. 

A few days ago, Bangladesh expressed confidence that its US$ 200 million swap facility first extended to Sri Lanka in 2021 would be repaid by the Lankan authorities by September this year. 

“Sri Lanka is gradually doing better. They are recovering slowly. We have given them time till September (to repay the loan),” Bangladeshi Foreign Minister AK Abdul Momen was quoted as having said to reporters. 

Sri Lanka is currently pursuing a programme with the International Monetary Fund and Momen had said the country was making progress in obtaining multilateral lender’s support. 
Bangladesh itself engaged with the IMF recently, and its Executive Board on January 30 approved US$ 3.3 billion under a 42 -month Extended Fund Facility and another US$ 1.4 billion under the newly created Resilience and Sustainability Facility. 

The approval enabled the release of the first tranche of about US$ 476 million immediately. 

Sri Lanka’s IMF programme grinds on as the country entered the IMF process after defaulting on its foreign currency loans. Hence, this requires debt assurance from all its bilateral creditors before the Executive Board approved the envisaged US$ 2.9 billion programme. 

As both the Paris Club creditors and India have provided their assurance by now, Sri Lanka awaits more credible assurances from China whose 2-year moratorium on debt falls short of what the IMF requires.