Sri Lanka debt restructuring makes slow progress even with 1.6% growth rate in Q3 of 2023

The restructuring of Sri Lanka’s external debt is to take much longer than expected, going by President Ranil Wickremesinghe’s policy speech on February 6 even though he signalled a positive shift in the cash-strapped economy with a surplus by the end 2023, first since 1977.

The restructuring of Sri Lanka’s external debt is to take much longer than expected, going by President Ranil Wickremesinghe’s policy speech on February 6 even though he signalled a positive shift in the cash-strapped economy with a surplus by the end 2023, first since 1977.

Delivering the ‘Statement of Government Policy’ on the first day of the Fifth Session of the Ninth Parliament, Mr. Wickremesinghe said the finalisation of debt restructuring could be completed by the first half of the year, which is going beyond the earlier anticipation for it to be completed within the first quarter.

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“The domestic debt restructuring plan has been successfully executed as the first step, and a policy agreement for restructuring has been reached with foreign creditors as the second step. Negotiations with private creditors are presently in progress, Mr. Wickremesinghe, who is also the Finance Minister, said.

“By September 2023 our total debt burden was $91 billion. It will take a considerable period of time to settle this debt. In order to meet our debt, we need to source the funds locally. It is imperative that we generate this income; otherwise, we risk falling into the debt trap once again,” he said.

He said even under the current negotiations for restructuring, Sri Lanka still has to pay around $3 billion per year.

Referring to his unpopular economic reforms, Mr. Wickremesinghe said he was aiming to lessen the tax burden as the economy stabilises. There is also room for a potential revision of the VAT percentage.