Sri Lanka seeks $17b debt reduction by restructuring

Sri Lanka’s president urged lawmakers Wednesday to approve a four-year International Monetary Fund program to restruc-ture the country’s $17 billion in foreign debt.

Parliament began a three-day debate Wednesday on President Ranil Wickremesinghe’s proposal to accept the IMF pro-gram. It will be followed by a vote.

If approved, the plan would dictate how Sri Lanka’s crisis-stricken economy will be managed in the coming few years.

A majority of lawmakers are expected to accept the IMF’s four-year bailout program. Under the plan, the international de-velopment lender will provide nearly $3 billion in stages.

Sri Lanka announced last year that it was suspending repayment of its foreign loans because of a severe foreign currency crisis resulting from the impact of the Covid-19 pandemic and efforts by the central bank to stabilize the Sri Lankan rupee by by using scarce foreign reserves.

Wickremesinghe said at the time he took over as president last July, the country’s total debt, including both domestic bor-rowing and foreign was $83.6 billion.

Wickremesinghe said negotiations on restructuring Sri Lanka’s foreign debt will be held with neighboring India and the Paris Club, a group of major creditor nations on one platform, and separately with China.

Debt restructuring can take various forms including bailouts, renegotiating terms of loans and writing off or reducing the amount owed for some loans.

Sri Lanka also needs to restructure its domestic debt. Wickremesinghe said the government would safeguard local banks and employee provident funds it has borrowed from if need be.