Sri Lanka has successfully reached restructuring agreements with over 98% of its external creditors and completed more than 90% of its public external debt restructuring, according to a Treasury statement issued after an investment call on 31 July.
The call was jointly hosted by the Ministry of Finance, Planning and Economic Development and the Central Bank of Sri Lanka (CBSL), marking a key milestone in the nation’s debt resolution journey.
On the bilateral debt front, the government finalized negotiations with major lenders such as China EXIM Bank, Saudi Arabia, Japan, India, France, and Hungary.
These agreements cover a large portion of the $5.82 billion owed to the Official Creditor Committee, a group of 17 countries. Discussions with Kuwait over $95 million are still ongoing, while other bilateral debts totaling approximately $200 million are nearing completion.
Regarding commercial debt, Sri Lanka restructured 98% of its $10.59 billion International Sovereign Bonds (ISBs) in December 2024. The $3.20 billion owed to China Development Bank has also been restructured and fully implemented.
Remaining negotiations involve two commercial banks and some holders of the 2022 Bonds who did not participate in the exchange offer, representing less than $50 million exposure.
One bank has agreed to terms, and talks with the other are close to finalization. However, Hamilton Reserve Bank (HRB), which claims 25% of the 2022 Bonds, has initiated legal action seeking full repayment.
Some other bondholders have engaged in discussions to settle under the most-favoured-creditor clause of the 2024 exchange offer. SriLankan Airlines’ $175 million government-guaranteed bonds remain under negotiation.
The government affirmed its commitment to finalizing all outstanding talks in line with International Monetary Fund (IMF) debt sustainability targets and comparability of treatment principles.
To strengthen debt oversight, the Finance Ministry established the Public Debt Management Office (PDMO) in December 2024, which is expected to be fully operational by January 2026.
The PDMO will be responsible for managing proactive debt strategies and evaluating opportunities to optimize Sri Lanka’s debt portfolio.
Addressing concerns about Macro-Linked Bonds (MLBs), which adjust debt payments based on economic performance, the government noted current projections suggest a higher likelihood of triggering upside payment scenarios.
This reflects the strength of Sri Lanka’s economic recovery. While such triggers may increase debt payments, the MLBs are structured to maintain long-term debt sustainability and repayment capacity.
The government emphasized that Sri Lanka’s performance under the IMF program remains strong even if these bonds are triggered.
As of December 2024, total government debt stood at $101.2 billion, with state-owned enterprises’ debt at $4.8 billion. Public debt amounted to 106.2% of GDP.
During the investor Q&A, officials highlighted progress in trade relations with the United States, including tariff reductions from an initial 44% to a finalized 20%, improving competitiveness in key export sectors like apparel. The government plans to collaborate with exporters and industries to adjust export strategies accordingly.
Officials confirmed ongoing negotiations with remaining commercial creditors and bondholders, aiming to conclude agreements in the coming months in line with IMF guidelines. The PDMO will continue to explore liability management and proactive debt operations as appropriate.
Sri Lanka’s substantial progress in debt restructuring represents a critical step towards fiscal stability, investor confidence, and sustained economic recovery amid global challenges.
