Sri Lanka approves USD12.5B sovereign debt restructuring agreement
Date
10/6/2024 3:23:44 AM
(MENAFN) Sri Lanka's new government has ratified an agreement made by the former president to restructure USD12.5 billion in sovereign bond debt owed to private creditors. The Ministry of Finance confirmed the decision in a statement, which was initially reported by a news agency. The approval follows a preliminary agreement announced on September 19.
The country faced its worst economic and financial crisis in 2022, leading to a default on its USD46 billion external debt due to a severe shortage of hard currency for essential imports like food, fuel, and medicine. In response, Sri Lanka secured a USD2.9 billion bailout from the International Monetary Fund (IMF), which came with strict conditions, including austerity measures and a debt restructuring plan.
Just two days before the presidential election on September 21, former President Ranil Wickremesinghe revealed a deal with creditors and the China Development Bank. This agreement would see a 27 percent reduction in the debt owed to private creditors and an 11 percent cut in the interest that had accumulated since the default.
The newly elected president, Anura Kumara Dissanayaka, has expressed his desire to renegotiate certain aspects of the IMF deal, specifically aiming to lower taxes and duties on essential goods like food and medicine to ease the burden on the population. Finance Minister Vijita Herat also mentioned that an IMF delegation would visit Sri Lanka on Wednesday to meet with the new government, with formal negotiations set to take place later this month in the United States.
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