Sri Lanka is advancing its debt restructuring process by issuing new bonds to replace $12.55 billion of defaulted sovereign bonds. This marks a critical step in addressing its $43 billion foreign debt crisis. As announced by the Ministry of Finance, bondholders can swap their holdings for new securities until December 12, 2024.
President Anura Kumara Dissanayake called on private creditors to support the restructuring, emphasizing its importance for the country’s economic recovery. This move aligns with securing further tranches from a $3 billion IMF bailout, contingent on substantial progress in debt restructuring.
The restructuring is projected to reduce Sri Lanka’s debt servicing burden by $9.5 billion over the four-year IMF program. Investors, buoyed by post-Covid tourism recovery and potential IMF flexibility on fiscal measures, view the new bonds as attractive. Sri Lanka’s dollar bonds have already delivered nearly 30% gains this year, among Asia’s best-performing debt instruments.
While the Ministry of Finance has not disclosed specific exchange terms, the plan represents a significant effort to restore fiscal stability and rebuild international market confidence.
