Lanka eyes $5bn in foreign funds after debt restructure

Sri Lanka expects to attract about US$5 billion in foreign funds in the next two years once it can finalize the restructuring of its overseas debt, the country’s foreign minister said.

The nation defaulted on its overseas debt in May 2022 after a severe shortage of foreign exchange reserves triggered the worst financial crisis since independence from Britain in 1948.

Sri Lanka has since made progress on about US$11 billion of bilateral debt restructuring and hopes to have agreements with all key creditors, including bondholders, by May at the latest, Foreign Minister Ali Sabry told Reuters.

It will then focus on kick-starting major infrastructure projects suspended during the crisis, including a highway, an expansion of the main airport near Colombo, and a US$2 billion light railway project with Japan.

“We are looking at, within the next 12 to 24 months, somewhere in the region of about US$5 billion worth of foreign currency infusion into the country in terms of projects and also from the sale of some state-owned enterprises,” Sabry said in an interview.

Sabry said that Sri Lanka’s private creditors account for about US$16 billion of debt, including international sovereign bonds.

“If we agree with them, then we can…start lifting the moratorium on the foreign debt payments.”

That would make it easier for investment to flow into Sri Lanka, including US$1.5 billion committed for Colombo’s Chinese-funded Port City and renewable energy and port terminal projects by India’s Adani Group.