In the first meeting of the official bilateral creditors committee, Sri Lankan authorities formally requested debt treatment on Tuesday. The meeting was held online and co-chaired by India, Japan, and France. The 17-member committee consists of Paris Club creditors as well as other official bilateral creditors, including China, Saudi Arabia, and Iran as observers. The new framework, launched in Washington D.C. in April, was held within creditors’ hope that it will serve as a model to resolve the debt difficulties of middle-income economies.
Last month, France, India, and Japan unveiled a common platform to co-ordinate restructuring of Sri Lanka’s debt. According to government data, Sri Lanka owes USD 7.1 billion to bilateral creditors, with China being owed USD 3 billion, followed by USD 2.4 billion to the Paris Club of creditor nations, and USD 1.6 billion to India. The government also needs to renegotiate more than USD 12 billion of debt in eurobonds with overseas private creditors and USD 2.7 billion of other commercial loans.
Sri Lanka has already begun talks to rework part of its domestic debt and aims to finalize a deal by May. The Paris Club committee is a significant move for Sri Lanka, which is struggling to repay its mounting foreign debt amidst the COVID-19 pandemic’s economic fallout. The authorities hope that the move will allow them to restructure their debt and come up with a sustainable repayment plan.
