In a landmark development, the Government of Sri Lanka has successfully reached an agreement in principle with the Official Creditor Committee (OCC) on a comprehensive debt treatment plan.
The accord, covering an estimated US$ 5.9 billion of outstanding public debt, signifies a major stride towards financial stability for the South Asian nation.
The agreement encompasses a strategic blend of measures, including a substantial extension of long-term maturities and a reduction in interest rates. This concerted effort aligns with Sri Lanka's commitment to restoring public debt sustainability, in accordance with the targets outlined in the International Monetary Fund (IMF) program.
Commending the collaborative spirit of OCC members, the Sri Lankan Government expressed gratitude for their crucial role in achieving this breakthrough. The accord sets the stage for the swift approval by the IMF Executive Board of the First Review of Sri Lanka's IMF-supported program, unlocking a crucial tranche of IMF financing totaling approximately US$ 334 million.
The specifics of the agreement will be formalized in a detailed Memorandum of Understanding between Sri Lanka and the OCC. This framework will be implemented through bilateral agreements with each OCC member, adhering to their respective laws and regulations.
Mr. K M Mahinda Siriwardana, Secretary to the Treasury/Ministry of Finance, Economic Stabilisation and National Policies, lauded the achievement, stating, "This agreement marks a landmark step for Sri Lanka. We extend our sincerest thanks to the OCC and its co-chairs, Japan, India, and France, for the unwavering support in resolving our country's public debt situation. This agreement serves as a key milestone in Sri Lanka's ongoing endeavor to achieve public debt sustainability and foster economic recovery."
This breakthrough, coupled with the recent agreement with China Eximbank, addresses a significant portion of Sri Lanka's external bilateral debt restructuring. The government is now set to finalize agreements with other official bilateral creditors, including Saudi Arabia, Pakistan, Kuwait, and Iran, amounting to an additional US$ 274 million.
Looking ahead, Sri Lanka aims to engage in similar negotiations with external commercial creditors, particularly international sovereign bondholders. The government invites all stakeholders to join in good-faith discussions to expedite mutually acceptable agreements.
Authorities emphasize their commitment to transparency, ensuring equitable treatment for all participating external creditors, and full compliance with the debt sustainability targets set forth in the IMF-supported program. Sri Lanka remains resolute in its dedication to economic recovery and expresses gratitude for the continued cooperation of all parties involved.
