Sri Lanka to opt for domestic debt restructuring post-IMF bailout: Government

After IMF bailout, Sri Lanka is exploring the options for domestic debt restructuring to further stabilise its shaken economy, an official statement said on March 31, 2023.

Cash-strapped Sri Lanka is exploring the options for domestic debt restructuring in the post-IMF bailout scenario to further stabilise its shaken economy, an official statement said on Friday.

Sri Lanka received $330 million this month as the first tranche of the International Monetary Fund (IMF) bailout programme, which will pave the way for the debt-ridden country to achieve better “fiscal discipline” and “improved governance”.

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In a statement issued by the Sri Lankan government after making an investor presentation on Thursday, the Governor of the Central Bank and the Secretary to the Treasury said, “the Authorities are also exploring options for a domestic debt optimisation (DDO) operation aimed at liquidity relief while preserving financial stability to avoid further eroding of Sri Lanka’s repayment capacity”.

The statement outlined that despite the ambitious fiscal consolidation efforts, Sri Lanka’s public debt trajectory is set to remain unsustainable in the absence of comprehensive debt treatment.

"Sri Lanka is also facing a significant external financing gap over the IMF program period.

This financing gap will have to be covered through new external funding and external debt service relief,” the statement said.