Colombo: As per reports, Sri Lanka has acknowledged that the recent visit by Indian External Affairs Minister S. Jaishankar played a significant role in advancing its debt restructuring process with international bondholders. Jaishankar’s day-long trip on October 4 marked the first foreign visit to Sri Lanka since Anura Kumara Dissanayake took office as president on September 23.
Cabinet spokesman and Foreign Affairs Minister Vijitha Herath highlighted that India’s support, as a bilateral creditor, was crucial to aligning with the principle of comparative treatment in debt restructuring. This endorsement from India came at a critical time, as Sri Lanka grapples with restructuring around USD 17.5 billion in external commercial debt, following an agreement reached with creditors in September.
Sri Lanka, which declared its first-ever sovereign default in April 2022 after exhausting its foreign exchange reserves, has since faced significant financial constraints, halting debt services and hindering access to new financing. The government reached a restructuring deal with international sovereign bondholders in July 2024, following lengthy negotiations involving major creditors, including India, China, Japan, and France.
Sri Lanka’s ongoing discussions with the International Monetary Fund (IMF) for the next tranche of a USD 2.9 billion bailout package have made debt restructuring a key condition. The IMF has acknowledged positive outcomes from Sri Lanka’s economic reform program, having released the third tranche of the package in June.
Herath noted that international bondholders had requested assurances from bilateral creditors regarding fair debt treatment. India's endorsement has been a vital step toward resolving this issue.
When asked about the status of Indian projects in Sri Lanka, including the Adani Group’s wind power project, Herath stated that these matters were not discussed during Jaishankar’s visit. The current transitional government is focused on the upcoming parliamentary elections in November.
The ruling National People’s Power (NPP) party had previously expressed opposition to the Adani wind power project in southeastern Sri Lanka, citing concerns about the high cost of power. Herath explained that the government would thoroughly evaluate the project after the new administration is formed, considering the legal challenges it has faced.
Sri Lanka's debt restructuring efforts continue as the country seeks to stabilise its economy and secure further financial support.
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