Sri Lanka Wants To End Debt Treatment Soon, Says Treasury Secretary

COLOMBO (News 1st); Sri Lanka's Finance Secretary, Mahinda Siriwardena, has expressed optimism that the country's debt treatment chapter will soon be closed, paving the way for a renewed and robust financial relationship. 

This development is crucial for the island nation as it seeks to stabilize its economy and secure fresh financing.

Speaking at an event on Wednesday (30) Siriwardena highlighted the significant role China has played in supporting Sri Lanka through its economic challenges. "China has extended financial aid and loans to help Sri Lanka address its economic challenges, especially during times of crisis," he said.

He emphasized that China's ongoing support is vital for Sri Lanka's aspirations for economic growth and modernization.

China's involvement has been particularly pivotal in Sri Lanka's debt treatment efforts, which have been ongoing since the unprecedented economic crisis that began in mid-2021. 

Siriwardena noted that in October 2023, China was the first official screditor to announce an agreement in principle on the key financial terms for the treatment of debts owed to the Exim Bank of China. This agreement was followed by a final agreement on debt treatment terms in June 2024, coinciding with a similar memorandum of understanding signed with the Official Credit Committee (OCC), which includes 17 official lenders co-chaired by France, India, and Japan.

Following the agreement's implementation, the Exim Bank of China became the first external lender to conclude the debt treatment process. Significant progress has also been made with the China Development Bank (CDB), with final stages of comparability of treatment matters being addressed.

Siriwardena acknowledged the complexity and technical challenges of the debt treatment process, particularly in ensuring comparability with the IMF's Debt Sustainability Analysis and with other creditors. He credited the mutual trust and good faith demonstrated by both sides for the progress made.

As Sri Lanka nears the conclusion of this critical chapter, the Finance Secretary remains hopeful that the country can soon resume a robust financial relationship, including securing fresh financing for high-quality priority projects.