Sri Lanka debt restructuring plan saves $5b

Sri Lanka is taking a significant step towards economic recovery with a debt restructuring deal that will save the country $5 billion, according to President Ranil Wickremesinghe.

Sri Lanka recently finalised agreements with China and other creditor nations to restructure around $10 billion in bilateral debt. After 15 months of negotiations, the deal extends the repayment period to 2043 and lowers interest rates to 2.1 per cent.

Talks are ongoing to restructure another $12.5 billion owed to bondholders. Additionally, Sri Lanka needs to finalise a deal with the China Development Bank for a separate $2.2 billion debt.

This debt rework, supported by a $2.9 billion the International Monetary Fund (IMF) programme, aims to reduce Sri Lanka’s overall debt burden by $16.9 billion.

The saved funds will be used to improve public services, boost dollar reserves, and potentially lower domestic interest rates. The central bank forecasts a three per cent economic expansion in 2024, following a contraction last year.

Attribution: Reuters