Sri Lanka Secures $5.8 Billion Debt Deal with India, France, and Japan

Sri Lanka has finalized a $5.8 billion debt restructuring deal with the Official Creditors Committee (OCC) on June 26, 2024. This marks a significant step in the country’s recovery from the 2022 financial crisis.

Formation of the OCC

The OCC, which includes creditor nations like India, France, and Japan, was established on April 13, 2023, to discuss and finalize a plan for restructuring Sri Lanka’s debt. This followed the IMF’s approval of an Extended Fund Facility (EFF Programme) for Sri Lanka on March 20, 2023.

India’s Role

India, as one of the co-chairs of the OCC, has shown strong commitment to Sri Lanka’s economic recovery. India provided unprecedented financial support of $4 billion and was the first creditor nation to offer financing assurances to the IMF, enabling Sri Lanka to secure the IMF programme.

Statements from Leaders

Sri Lankan President Ranil Wickremesinghe expressed gratitude to the lending nations, including India, China, Japan, and France. He acknowledged the hard work of Sri Lankan ministers and officials and the patience and resilience of the citizens. He also thanked the Paris Club Secretariat for their support in the negotiations.

Wickremesinghe stated, “The journey to this point has not been easy. We have traveled a difficult and arduous path. Despite the ongoing challenges, we have persevered.”

Background

Sri Lanka defaulted on its foreign debt in April 2022 after running out of foreign exchange, leading to the worst economic crisis in the country’s history and the resignation of then-president Gotabaya Rajapaksa.