Sri Lanka Strikes Debt Restructuring Deal with India, China, and France
ECONOMY & POLICY

Sri Lanka Strikes Debt Restructuring Deal with India, China, and France

Sri Lanka's President Ranil Wickremesinghe announced in a televised address that a debt restructuring deal had been reached with several countries, including India, France, Japan, and China. The agreement, he noted, represented a significant milestone in the country's economic recovery following its default on debt repayment in 2022.

According to Wickremesinghe, Sri Lanka, which is currently under an International Monetary Fund bailout program, anticipates that the debt restructuring will facilitate the reopening of avenues for bilateral transactions and the resumption of foreign projects that had stalled due to the default.

Wickremesinghe stated that earlier that day in Paris, Sri Lanka had finalised an agreement with its official bilateral creditors. Similarly, another agreement had been signed with China's Exim Bank in Beijing on the same day. He expressed confidence in these developments, declaring, "Sri Lanka has emerged victorious."

Previously, Sri Lanka had declared bankruptcy in April 2022 and halted repayments on approximately $83 billion in domestic and foreign loans. This action came amidst a severe foreign exchange crisis that severely impacted essential supplies such as food, medicine, fuel, and gas, and led to prolonged power outages.

The roots of Sri Lanka's crisis could be traced to significant economic mismanagement exacerbated by the aftermath of the COVID-19 pandemic and terrorist attacks in 2019, which devastated the nation's vital tourism industry. The pandemic also disrupted remittance flows from Sri Lankans working abroad.

In addition, the previous government's decision to cut taxes in 2019 significantly depleted the country's finances just as the pandemic struck. This led to a rapid decline in foreign exchange reserves, leaving Sri Lanka unable to finance imports or stabilise its currency, the rupee.

Wickremesinghe highlighted that as per the new agreements, Sri Lanka would defer all bilateral loan installment payments until 2028. Moreover, the country would repay all loans under concessional terms, with an extended repayment period stretching until 2043.

Sri Lanka's President Ranil Wickremesinghe announced in a televised address that a debt restructuring deal had been reached with several countries, including India, France, Japan, and China. The agreement, he noted, represented a significant milestone in the country's economic recovery following its default on debt repayment in 2022. According to Wickremesinghe, Sri Lanka, which is currently under an International Monetary Fund bailout program, anticipates that the debt restructuring will facilitate the reopening of avenues for bilateral transactions and the resumption of foreign projects that had stalled due to the default. Wickremesinghe stated that earlier that day in Paris, Sri Lanka had finalised an agreement with its official bilateral creditors. Similarly, another agreement had been signed with China's Exim Bank in Beijing on the same day. He expressed confidence in these developments, declaring, Sri Lanka has emerged victorious. Previously, Sri Lanka had declared bankruptcy in April 2022 and halted repayments on approximately $83 billion in domestic and foreign loans. This action came amidst a severe foreign exchange crisis that severely impacted essential supplies such as food, medicine, fuel, and gas, and led to prolonged power outages. The roots of Sri Lanka's crisis could be traced to significant economic mismanagement exacerbated by the aftermath of the COVID-19 pandemic and terrorist attacks in 2019, which devastated the nation's vital tourism industry. The pandemic also disrupted remittance flows from Sri Lankans working abroad. In addition, the previous government's decision to cut taxes in 2019 significantly depleted the country's finances just as the pandemic struck. This led to a rapid decline in foreign exchange reserves, leaving Sri Lanka unable to finance imports or stabilise its currency, the rupee. Wickremesinghe highlighted that as per the new agreements, Sri Lanka would defer all bilateral loan installment payments until 2028. Moreover, the country would repay all loans under concessional terms, with an extended repayment period stretching until 2043.

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