Wickremesinghe defends Sri Lanka's debt restructuring deal amid criticism

Dismissing the Opposition's criticism as inaccurate, Wickremesinghe argued that no bilateral creditor would agree to a reduction of principal amount

Sri Lankan President Ranil Wickremesinghe on Tuesday countered the Opposition's criticism of the cash-strapped country's external debt restructuring agreement with major bilateral creditors and promised to table all agreements and documents regarding debt restructuring to a parliamentary panel for scrutiny.

The planned two-day debate in Parliament on the deal was, however, postponed as Opposition members protested the lack of transparency regarding the agreements reached.

Dismissing the Opposition's criticism as inaccurate, Wickremesinghe argued, "No bilateral creditor would agree to a reduction of principal amount. Instead, concessions are allowed through extended repayment periods, grace periods and lower interest rates."

The president, who also holds the portfolio as the finance minister, said, "The agreements with bilateral creditors include extending principal repayments until 2028, maintaining interest rates below 2.1 per cent, and extending the full debt resettlement grace period until 2043."

Wickremesinghe said, "Sri Lanka's external debt now totals $37 billion, which includes $10.6 billion in bilateral credit and $11.7 billion in multilateral credit. The commercial debt is $14.7 billion, of which $12.5 billion is in sovereign bonds. The debt restructuring," he said, "aims at making the debt sustainable, freeing up funds for public services."

President Wickremesinghe said, "He would submit all agreements and documents regarding debt restructuring to the Public Finance Committee of Parliament, emphasising the need for thorough scrutiny and broad attention to the matter," his office posted on X.

He said that the restructuring of debt was to make it sustainable and would make way for allocating more funds for public services.

"The country is now able to secure foreign loans and resume projects that had been halted midway due to lack of foreign funding," Wickremesinghe said.

Foreign lending to Sri Lanka ceased in April 2022 when the government declared a sovereign default.

Wickremesinghe acknowledged the short-term credit assistance provided by India and Bangladesh during that period. "At that stage we were helped by two friendly nations -- India and Bangladesh -- who gave us short term credit assistance. No other country was permitted to extend long term loans," he said.

Wickremesinghe assured that all debt restructuring agreements would be presented to Parliament once the ongoing talks with sovereign bond holders concluded.

Wickremesinghe's statement was followed by the main opposition leader, Sajith Premadasa, who reiterated that the government has failed to secure the best possible deal in the debt restructuring process.