Cash-strapped Sri Lanka secures debt deal before vote
Sri Lanka secured a deal on Thursday with international bondholders to finalise a prolonged debt restructure, a key International Monetary Fund demand to repair the island nation's ruined finances. The announcement came two days before Sri Lanka holds its first presidential election since its unprecedented 2022 economic crisis, which saw months of food, fuel and medicine shortages and sparked widespread social upheaval. Creditors holding more than half of international sovereign bonds and foreign private loans to the South Asian nation agreed to a 27-percent haircut on their loans, a government statement said. "Sri Lanka is pleased to report that it has reached an agreement in principle... on the terms of a comprehensive restructuring," it added. The country's austerity measures under the IMF programme have been the central issue during campaigning for Saturday's presidential poll. International Sovereign Bonds account for just over US$12.5 billion of the island's foreign debt, which stood at US$46 billion during Sri Lanka's first government default in 2022. President Ranil Wickremesinghe's government had announced a deal with bondholders in July, but ultimately walked away from it in the belief its provisions were economically unsustainable. As part of Thursday's deal, bondholders also agreed to an 11-percent haircut on overdue interest payments accumulated since the default. The deal will still have to be approved by parliament during its next session in October. Wickremesinghe's two main challengers in Saturday's vote have also vowed to renegotiate any debt deals if elected. The crisis two years ago brought enduring economic hardship and street protests that toppled then-president Gotabaya Rajapaksa, who was forced into temporary exile after a mob stormed his compound. Sri Lanka secured a US$2.9-billion bailout from the IMF in 2023 after doubling taxes, withdrawing energy subsidies and raising prices of essentials to shore up state revenue. The IMF has said Sri Lanka had returned to growth after a record 7.8-percent recession in 2022, but warned its economy was still not out of the woods. In June, the government concluded a deal with its bilateral lenders to restructure its official credit amounting to US$6 billion. (AFP)