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Colombo Sri Lanka agreed to restructure $10 billion in bilateral debt with creditor countries, including China, on Wednesday, a key step toward stabilizing its crisis-hit economy.
Sri Lanka began a debt restructuring procedure in September 2022 after its reserves plummeted and it defaulted on its international debt for the first time.
The accords will enable Sri Lanka to proceed with a $2.9 billion IMF program to recover from its financial crisis.
Lankan officials in Paris signed the deal with the Official Creditor Committee (OCC), co-chaired by Japan, India, and France and composed of 17 nations that have loaned $5.8 billion to the country.
“This agreement provides significant debt relief, allowing Sri Lanka to fund essential public services and secure concessional financing for development,” the president’s media office stated.
It noted that Colombo reached a separate arrangement to restructure $4.2 billion in China EXIM Bank debt.
The island country must persuade investors to restructure $12.5 billion in foreign obligations.
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Sri Lanka’s dollar-denominated bonds fell 0.4 cents to 60 cents, Tradeweb data indicated.
Over the previous two months, its overseas bonds have gained 5 cents, with some trading at their highest prices since late 2021.
His office stated President Ranil Wickremesinghe would address the country later in the day to discuss Sri Lanka’s economy.
Japan stressed the necessity of similar treatment by non-OCC official bilateral creditors and private creditors in the current Paris Club annual report, supporting Sri Lanka’s economic recovery via debt restructuring.
“For future cases, we should encourage all official bilateral creditors to join an OCC to achieve comparable treatment in a transparent and swift manner,” said Japan’s Ministry of Finance deputy vice minister for foreign affairs Daiho Fujii.
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