Sri Lanka to save $5b after debt rework

COLOMBO:

Sri Lanka will save $5 billion in interest owed to bilateral creditors as part of its debt restructuring process, President Ranil Wickremesinghe said on Tuesday, adding that the funds will be used to boost dollar reserves and restore growth.

The cash-strapped South Asian country inked deals with China and other creditor nations to restructure about $10 billion in bilateral debt last week following 15 months of negotiations, Wickremesinghe told parliament.

The agreements brought Sri Lanka closer to the end of a debt restructuring process that began in September 2022 after its foreign exchange reserves hit their lowest levels and forced the island nation to default on its foreign debt for the first time.

“Sri Lanka gains multiple benefits from this agreement. The repayment period has been extended by eight years to 2043 and interest rates have been adjusted to 2.1% or less,” Wickremesinghe said.

The debt rework, which is underpinned by a $2.9 billion International Monetary Fund (IMF) programme, gives Sri Lanka a chance to restore its debt sustainability and use saved funds to improve public services, increase reserves, and reduce domestic interest rates, he added.