Sri Lanka reaches debt restructuring agreements with external creditors

On September 19, 2024, Sri Lanka announced it had reached Agreements in Principle on restructuring approximately USD 17.5 billion of its external commercial debt, as of the end of 2023.

These agreements were made with holders of the country’s International Sovereign Bonds, following negotiations with the Ad Hoc Group of Bondholders (AHGB), representing international investors, and the Local Consortium of Sri Lanka (LCSL), a coalition of domestic financial institutions.

Collectively, the two groups represent more than 50% of Sri Lanka’s bonds.

Under the restructuring agreements, bondholders will agree to a 40.3% reduction in the present value of the debt, calculated using an 11% discount rate.

This represents an enhanced level of debt relief compared to the Joint Working Framework agreed upon in July 2024, and includes further reductions in interest payments.

Sri Lanka also finalized an agreement in principle with China Development Bank (CDB) on restructuring approximately USD 3.3 billion of sovereign debt. This follows previous agreements reached with Eximbank of China and members of Sri Lanka’s Official Creditor Committee (OCC).

In total, these agreements will provide Sri Lanka with over USD 17 billion of debt relief during its International Monetary Fund (IMF) program period. Key contributions to the relief include USD 2.4 billion from Eximbank of China, USD 2.9 billion from the OCC, USD 2.5 billion from CDB, and USD 9.5 billion from bondholders.

President Ranil Wickremesinghe expressed deep gratitude to Sri Lanka’s creditors for their constructive engagement and to the IMF and OCC Secretariat for their ongoing support throughout the debt restructuring process.