Sri Lanka debt restructuring

Sri Lanka’s default highlights the dangers of relying on international sovereign bonds – with high interest rates – to fund development.

India has already given the necessary assurances to the IMF. Other bilateral creditors, including China, have not yet but Sri Lanka says there’s progress in the ongoing discussions. 

Colombo is still waiting on Beijing’s approval for debt restructuring.

Sri Lanka’s debt restructuring is deeply embedded both within a global emerging market debt crisis and a moment of rethinking within China about its global role as a creditor. 

Sri Lanka is nearly bankrupt and has suspended repaying its $51 billion foreign debt, of which it must repay $28 billion by 2027.

The package is contingent on assurances from creditors, including China, India and Japan that debt sustainability will be restored.

How did Sri Lanka’s economic crisis get so bad – and how can the country move forward from here?

China's role in lending to Sri Lanka has expanded in the last 20 years, but fewer Chinese loans would not have saved the country from its current economic crisis.

China's general approach to debt distress is to seek bespoke negotiations and preferential treatment – something that Sri Lanka must avoid at all costs.