Sri Lanka’s bondholders sign off on $12.55bn debt overhaul

Sri Lanka on Tuesday completed its long-delayed foreign debt restructuring after the island nation defaulted on its $46 billion external debt in a dramatic 2022 economic crash, Harshana Suriyapperuma told parliament.

Its economy has recovered after getting an International Monetary Fund rescue package and imposing austerity reforms to repair the government’s ruined finances.

“The agreement we have reached today, with announcements from the Singapore and London stock exchanges, is a show of confidence in our government,” Suriyapperuma, the deputy finance minister, told parliament.

President Anura Kumara Dissanayake’s National People’s Power (NPP) coalition had previously criticized the restructuring deal as unfair to the nation and vowed to renegotiate after coming to power.

But since its win in snap parliamentary elections last month, Dissanayake has made a U-turn, saying the economic recovery was too fragile to jeopardize with any changes.

In September, most private creditors to Sri Lanka agreed to a 27 percent haircut on their loans.

Dissanayake said he would honor a deal secured by his predecessor to restructure $12.55 billion in international sovereign bonds, a key condition to maintain the $2.9 billion four-year IMF bailout loan.

The opposition criticized the move, calling it a “lucrative deal” for bondholders, opposition economic spokesman Harsha de Silva said.