Sri Lanka president’s debt deal speech raises doubts: real relief or election rhetoric?

President Ranil Wickremesinghe’s debt restructuring announcement seemed more like a campaign speech, analysts said

Reading Time:4 minutes

A supporter of Sri Lanka’s President Ranil Wickremesinghe cheers as he watches the president’s televised announcement of the country’s debt restructuring agreements on June 26. Photo: AP

Published: 9:49pm, 27 Jun 2024

Sri Lanka President Ranil Wickremesinghe announced much awaited agreements on debt restructuring with bilateral creditors, but many analysts see his politically charged speech as more of an effort to boost his standing before the coming elections rather than an accurate portrayal of the country’s still dire economic situation.

Wickremesinghe announced the conclusion of a final agreement on debt restructuring with Sri Lanka’s main bilateral creditors, including Japan and India, marking the end of debt restructuring negotiations with the Official Creditors’ Committee (OCC), during an address to the nation on Wednesday.

He also noted that a final agreement had been reached with China’s Exim Bank.

These agreements remain at the core of the IMF programme – aimed at restoring macroeconomic stability with financing worth US$2.9 billion – that Sri Lanka negotiated back in 2022 following its historic default in May that year amid the country’s debilitating economic crisis.

Under this week’s agreements, Sri Lanka is allowed to defer all bilateral loan instalment payments until 2028 and repay these loans on concessional terms, with an extended period until 2043. This arrangement will allow the country to maintain debt payments at less than 4.5 per cent of its GDP between 2027 and 2032. Additionally, its gross fiscal requirement, including loan repayments, is expected to decrease by more than 13 per cent by the period of 2027-2032.