Sri Lanka Engages Bondholders in Washington to Address Debt Crisis

In a significant step towards financial recovery, Sri Lanka’s central bank Governor Nandalal Weerasinghe announced that the country met with bondholders in Washington this week to discuss a debt exchange. This meeting, which took place on the sidelines of the IMF/World Bank meetings, is part of Sri Lanka’s efforts to swiftly emerge from its current default status. Weerasinghe emphasized the urgency of these discussions, stating the goal is to quickly move Sri Lanka out of the “default category.” As part of this process, Citibank has been appointed as the dealer manager to oversee a consent solicitation, a crucial next step in the country’s strategy to restructure its debt.

Sri Lanka found itself in uncharted waters in 2022 when it defaulted on its debt for the first time, triggered by a severe economic crisis. In September, the nation reached a draft agreement with creditors to restructure $12.5 billion of international bonds. This proposal received support earlier this month from the International Monetary Fund (IMF) and official bilateral creditors, marking a pivotal moment in Sri Lanka’s recovery efforts. Looking ahead, Weerasinghe noted that the upcoming review of the IMF program will be postponed due to the general election scheduled for November 14. While he did not provide a specific timeline for the review’s completion, he acknowledged the IMF’s commitment to engage with Sri Lanka’s economic team to establish a date for the third review.

In terms of economic outlook, Weerasinghe expressed cautious optimism, predicting that if economic reforms are implemented efficiently, the Sri Lankan economy could grow by approximately 3% in 2025. This forecast reflects a hopeful vision for the future as Sri Lanka works diligently to stabilize its economy and restore investor confidence. 

As these discussions progress, the world will be watching to see how Sri Lanka navigates its path out of default and towards a more sustainable economic future.