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The foundation for Sri Lanka’s economic recovery, following years of decline, has been successfully laid by the new Government, and its positive results will be felt by the country and its people within six months to a year, stated Labour Minister and Deputy Economic Development Minister Prof. Anil Jayantha Fernando.
Speaking at a special media briefing held yesterday morning (26) at the Presidential Media Centre in Colombo, Minister Fernando emphasised that only 1% of Sri Lanka’s bilateral foreign debt, amounting to US$ 300 million, requires restructuring. This involves negotiations with official creditors from Kuwait, Saudi Arabia, Iran, and Pakistan, while agreements have already been reached with other bilateral creditors under a unified framework.
Highlighting the progress made, Prof.Fernando noted that Sri Lanka has now completed its debt restructuring process and averted bankruptcy under the new Government’s economic stabilisation strategy. However, he clarified that resolving the country’s debt crisis alone does not address all economic challenges, underscoring the government’s commitment to sustainable solutions.
Commenting further, the Minister criticised past unilateral decisions by previous administrations, including the suspension of external debt servicing in April 2022. This, he said, added to the economic burden on the people due to delays and complexities in the restructuring process initiated under the prior Government. The current Government has made strides in advancing Sri Lanka’s economic stability, including reaching a staff-level agreement during the third review of the Extended Fund Facility (EFF) with the International Monetary Fund (IMF) on November 26, 2024. Efforts are underway to secure the next tranche of funds with IMF board approval, following comprehensive discussions with relevant stakeholders.
Domestically, debt restructuring was successfully completed in July 2023, while international debt restructuring, including multilateral and private creditors, continues. The official creditor committee, co-chaired by France, India, and Japan, finalised terms in June 2024, ensuring equitable treatment for all parties, including China Exim Bank and commercial creditors.
The restructuring of International Sovereign Bonds (ISBs), amounting to US$ 14.2 billion including US$ 1.7 billion in overdue interest, faced significant delays but ultimately culminated in an agreement on September 19, 2024, just two days before the presidential election. This agreement ensures sustainable debt solutions while prioritising long-term economic stability.
The Government’s efforts to stabilise the economy have been recognised by independent entities, including credit rating agencies, with significant improvements in ratings achieved through decisive actions and prioritization of reforms. A new bond issuance, scheduled for completion by December 20, 2024, will facilitate further economic stabilisation, aligning with the vision of creating a prosperous and developed nation.
This progress signifies a crucial step in Sri Lanka’s journey toward sustainable growth, aiming to provide its citizens with improved living standards and a stronger economy.
Jayasiri Munasinghe and Deneth Sankalana
