India has welcomed the news of a final agreement on debt restructuring between Sri Lanka and creditor nations reached on Wednesday June 26.

"We congratulate the Government of Sri Lanka for the signing of the MoU between the Official Creditors Committee & LK on debt restructuring. This signifies the progress made by LK in its economic stabilisation & recovery," official spokesperson of the Ministry of External Affair of India Randhir Jaiswal said in a post on X.


As one of the Co-Chairs of the OCC, along with France and Japan, India has been steadfast in its commitment to the stabilization, recovery and growth of the Sri Lankan economy.

This was also demonstrated by India’s unprecedented financial support of USD 4 billion to Sri Lanka. India was also the first creditor nation to convey financing assurances to the International Monetary Fund which paved the way for Sri Lanka to secure the IMF programme.

"India will continue to support Sri Lanka’s economic recovery including by promoting long-term investments in its key economic sectors," a statement by the External Affairs Ministry of India added.

In a significant milestone for Sri Lanka’s economic revitalization efforts, the island nation successfully finalized comprehensive debt restructuring agreements with key bilateral creditors including with the Official Creditor Committee (OCC) and China Exim Bank, marking pivotal strides towards stabilizing its financial footing amid recent economic challenges.

The agreements, valued at a combined USD 10 billion, encompass restructuring arrangements with major bilateral lenders under the auspices of the OCC, co-chaired by Japan, India, and France.

The IMF’s Debt Sustainability Analysis (DSA) guided the restructuring process, determining necessary debt relief measures to align with Sri Lanka’s fiscal recovery objectives. Each creditor, including the OCC and China Exim Bank, agreed to extend maturity periods, initiate capital grace periods, and reduce interest rates significantly. These measures collectively alleviate Sri Lanka’s near-term debt service obligations, freeing up resources for essential public expenditures crucial for economic stabilization and growth.

“This restructuring provides up to 92% relief on debt service payments during the IMF program, offering substantial fiscal breathing room crucial for prioritizing public services and stimulating economic growth,” commented a senior government official.

Beyond immediate fiscal benefits, the agreements pave the way for renewed bilateral financing opportunities, essential for resuming critical infrastructure projects. This infusion of foreign investment is anticipated to invigorate sectors such as construction, bolstering job creation and economic resilience.

Moreover, the successful restructuring sets the stage for potential improvements in Sri Lanka’s credit ratings once agreements with commercial bondholders are finalized. Enhanced credit ratings are expected to reduce the cost of foreign financing and facilitate easier access to international capital markets, fostering broader economic stability and growth.


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