Sri Lanka trying to reduce overall debt by $17 Billion, president says

Sri Lanka President Ranil Wickremesinghe in Parliament of Sri Lanka

Sri Lanka is trying to reduce its overall debt by $17 billion through restructuring, its president told the parliament on Wednesday as he sought support of opposition parties for a nearly $3 billion International Monetary Fund (IMF) programme.

President Ranil Wickremesinghe also said the country would discuss debt restructuring with India and the Paris Club of creditors on one platform and with China separately.

Caught in its worst financial crisis since independence from Britain in 1948, the island nation of 22 million people secured an IMF loan last month.

Sri Lanka owes $7.1 billion to bilateral creditors, according to official government data, with $3 billion owed to China, $2.4 billion to the Paris Club and $1.6 billion to India.

Wickremesinghe said no final decision had been taken yet on domestic debt restructuring.

He added that the country needs to accelerate growth to 6% or higher by 2028 or 2029 to repay debt and develop.

Sri Lanka is yet to finalise the debt restructuring plan which was expected to be handed over to the IMF, creditors and bondholders by the end of April, a senior finance Ministry source said, adding that the government is in touch with the IMF regarding the matter.

“We are still finalising the plan, it requires a lot of serious discussions. The (restructuring) programme may get delayed a few days or a week,” the source said, declining to be named as they were not authorised to speak to media.

Bloomberg News reported on Wednesday that Sri Lanka had pushed back release of debt restructuring plan to middle of May.

Sri Lanka will likely have another year of economic contraction in 2023, ratings agency S&P said on Wednesday but noted that conditions in the country were beginning to stabilise.

It affirmed Sri Lanka’s long-term and short-term foreign currency sovereign credit ratings as ‘SD/SD’, meaning selective default, and retained outlook on the long-term local currency rating as negative.