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Sri Lanka
This Week in AsiaEconomics

Sri Lanka takes a 5-day holiday to manage economic shocks as domestic-debt restructuring looms

  • The cash-strapped nation will begin to restructure its domestic debt this week after obtaining US$2.9 billion worth of financing from the IMF in March
  • But many remain concerned about potential impacts on financial markets – and question who will truly bear the brunt of the debt restructuring

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A street vendor prepares food in Colombo. Sri Lanka obtained US$2.9 billion worth of financing from the IMF in March. Photo: AP
Dimuthu Attanayake
As cash-strapped Sri Lanka begins its long-awaited domestic-debt restructuring process this week, local experts have voiced optimism that the plan will enhance a reform road map agreed upon with the International Monetary Fund earlier this year.
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Nandalal Weerasinghe, the country’s central bank chief, announced on Sunday that the process would get under way over the coming five-day bank holiday weekend – extended with a special additional holiday on Friday recently announced in the government gazette.

The process spans the announcement of the strategy to its implementation following approvals by the cabinet and the parliament.

“[The] government expects the entire process to conclude while the markets are closed during these five days,” Weerasinghe said.

The head office of Sri Lanka’s National Savings Bank in Colombo. All the country’s banks will be closed for five days from Thursday while a domestic debt-restructuring process gets under way. Photo: Reuters
The head office of Sri Lanka’s National Savings Bank in Colombo. All the country’s banks will be closed for five days from Thursday while a domestic debt-restructuring process gets under way. Photo: Reuters

The long bank closure is designed to help absorb any shocks to the market after the restructuring process, analysts say.

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