Sri Lanka strikes private debt restructuring deal with bondholders

Sri Lanka has reached a debt restructuring deal with the international sovereign bondholders after protracted negotiations

Sri Lanka has reached a debt restructuring deal with the international sovereign bondholders after protracted negotiations, state Finance Minister Shehan Semasingher said on July 4, calling it a "crucial step" in the cash-strapped country's efforts to restore debt sustainability.

In a statement, State Minister of Finance Mr. Semasinghe said that an agreement on restructuring terms was reached on July 3, completing Sri Lanka’s debt restructuring process.

“ISBs (International Sovereign Bonds) account for $12.5 billion out of the total external debt of $37 billion. This agreement is a crucial step in our efforts to restore debt sustainability,” Mr. Semasinghe said.

He added that the agreement with private bondholders was subject to the approval by the official creditor committee of nations, including India.

"This marks another key milestone in our journey towards economic revival and strengthening," he said.

Officials said the expected haircut agreed upon would amount to 28%, with an upfront payment to ISB holders commencing from September this year.

Officials said this completes Sri Lanka’s debt restructuring process, which came as a prerequisite for debt sustainability in the ongoing International Monetary Fund (IMF) bailout of $2.9 billion extended in March 2023 over a period of four years.