On Tuesday, Sri Lanka mentioned that External Affairs Minister S Jaishankar’s recent visit was crucial in resolving its debt restructuring with international sovereign bond holders. Jaishankar, who visited Sri Lanka on October 4 for an entire day, was the inaugural foreign dignitary to travel to the island country following Anura Kumara Dissanayake’s inauguration as the new president on September 23.
Cabinet spokesperson and Minister of Foreign Affairs, Vijitha Herath, informed journalists in this location that India’s participation in the agreement as a bilateral lender signifies that the agreement aligns with the principle of equal treatment in debt restructuring.
Before the presidential elections last month, financially struggling Sri Lanka announced on September 19 that they had reached a preliminary agreement with external commercial creditors to restructure around USD 17.5 billion of external commercial debts.
Sri Lanka announced its initial sovereign default in mid-April 2022, as it depleted its foreign exchange reserves, marking the first one since gaining independence from Britain in 1948. The suspension of debt payments prevented the countries lending money from providing new financial assistance to the nation.
This year in July, the Sri Lankan government finally agreed to a debt restructuring deal with international sovereign bondholders following lengthy discussions with nations like China, India, France, and Japan. Sri Lanka is currently in talks with the International Monetary Fund (IMF) for the upcoming installment of the USD 2.9 billion bailout package, with external debt restructuring being a requirement set by the IMF.
On August 2, the global lender based in Washington announced that the third installment of the bailout plan was issued in mid-June due to the successful outcomes of Sri Lanka’s economic reform efforts. Herath stated that bond holders had requested approval from bilateral creditors regarding the equal treatment of debt.
In the meantime, Herath was inquired about discussions on Indian projects in Sri Lanka, like the Adani investments, with Jaishankar. She explained that due to the upcoming parliamentary election in November, such topics were not brought up as the government is transitional.
Before the September 21 election, the NPP had announced plans to cancel the Adani wind power project in the southeast. Herath stated that the government must carefully consider both the advantages and disadvantages of the Adani wind project. The disagreement centered around the expensive price per power unit and was brought up in a legal setting. “We will examine all related issues once the new government is in place,” Herath stated.