Colombo: Sri Lanka’s President Ranil Wickremesinghe on Wednesday announced that debt restructuring agreements were finalised with bilateral lenders, including India and China, in Paris, describing the development as a “significant milestone” that will bolster international trust in the cash-strapped island nation.
In a televised address to the nation, President Wickremesinghe, who also holds the portfolio as the finance minister, said that Prime Minister Dinesh Gunawardena will present these agreements to Parliament on July 2 for ratification.
“This morning in Paris, Sri Lanka reached a final agreement with our official bilateral creditors. Similarly, we signed another agreement with China’s Exim Bank today in Beijing… Sri Lanka won….!!” said a jubilant Wickremesinghe, who has steered the effort to take the island out of the economic crisis since Sri Lanka declared its first-ever sovereign default in 2022.
Describing the development as a “significant milestone”, the president said, “With these agreements, we will be able to defer all bilateral loan instalment payments until 2028. Furthermore, we will have the opportunity to repay all the loans on concessional terms, with an extended period until 2043.”
He extended his gratitude to creditors, including China and the Exim Bank of China, India, Japan, and France, who co-chair the Official Creditors Committee.
“Our next objective is to reach an agreement with commercial creditors, which includes International Sovereign Bond (ISB) holders,” he said.
“The agreements we reached today will provide significant relief to our economy. In 2022, we spent 9.2% of our gross domestic product (GDP) on foreign debt payments. With the new agreements, it will pave the way for us to maintain debt payments at less than 4.5% of GDP between 2027 and 2032,” the president said.
Wickremesinghe also lashed out at “a few individuals” who, according to him, “attempted to disrupt our progress and continue to do so, but they have not succeeded in halting our journey. In the future, these detractors will face the shame of having betrayed their country.”
Earlier in the day, the President’s office said in a statement that Sri Lanka reached a final restructuring agreement for 5.8 billion US dollars with its bilateral lenders’ official creditor committee in Paris.
Wickremesinghe, 75, is expected to contest the presidential election in the coming months.
State Finance Minister Shehan Semasinghe announced that a final agreement has been reached on a bilateral debt treatment between Sri Lanka and the Export-Import Bank of China.
“On behalf of Sri Lanka, I would like to sincerely thank the OCC chairs – France, India, and Japan – as well as the Export-Import Bank of China for their leadership in this process, as well as all OCC members for their unwavering support,” he said.
He also commended the OCC Secretariat for their dedication to finding a resolution to our debt crisis and achieving this significant milestone, which will enhance confidence in Sri Lanka’s economy and foster growth.
This agreement means that half of the government’s external debt by creditor countries and organisations has been restructured. The details of the restructuring are yet to be announced.
According to the Treasury figures, as of the end of March 2024, the debt stock outstanding remained at USD 10,588.6 million.
The official creditor committee comprised the Paris Club of Nations – Japan, the UK, and the US, while the non-Paris Club nations were China, India and the rest.
Having sealed the deal with the bilateral creditors the government was to have another round of talks starting this week with private creditors and the international sovereign bondholders for restructuring. By March 2024 the outstanding commercial loan stock was 14,735.9 million US dollars.
Earlier this week, posters appeared on the city walls captioned “good news” which appears to be part of the political campaign on the success of the debt restructuring effort which took so long to achieve.
Sri Lanka in mid-April of 2022 declared its first ever sovereign default since gaining independence from Britain in 1948.
The International Monetary Fund had made external debt restructuring conditional to the USD 2.9 billion bailout – the third tranche of which came to be released last week.
Wickremesinghe supervised the IMF programme while setting in motion hard economic reforms prescribed by the world lender.
On Sunday, he made his first public statement on the presidential election, which is likely to take place in the last quarter of this year.
Addressing a group of youth, he said that the election could take place either in September or October.
Wickremesinghe is yet to announce his candidacy while two other main opposition leaders have already declared themselves to be in the fray.
In July 2022, Wickremesinghe was elected through parliament to become stop-gap president for the balance term of Gotabaya Rajapaksa who resigned following public protests over his inability to handle the economic crisis.
