Sri Lanka Debt Restructuring: Jaishankar's Visit Crucial - News

Colombo, Oct 8 (PTI) Sri Lanka on Tuesday said the recent visit by External Affairs Minister S Jaishankar was important in ending its debt restructuring with international sovereign bond holders.

Jaishankar, who made a day-long trip to Sri Lanka on October 4, became the first foreign dignitary to visit the island nation after Anura Kumara Dissanayake assumed office as the new president on September 23.

Cabinet spokesman and foreign affairs minister Vijitha Herath told reporters here that India's signing up for the agreement as a bilateral creditor endorsing that the agreement was compatible with the comparative treatment principle in debt restructuring.

Ahead of the presidential polls last month, cash-strapped Sri Lanka had on September 19 announced that it had reached an in principle agreement with the external commercial creditors for the restructuring of approximately USD 17.5 billion of external commercial debts.

Sri Lanka declared its first-ever sovereign default in mid-April 2022, having run out of its foreign exchange reserves, the first since gaining independence from Britain in 1948.

The halt to the debt services meant that the multilateral creditor nations and commercial lenders could not extend fresh financing to the country.

In July this year, the Sri Lankan government reached a debt restructuring deal with international sovereign bondholders after protracted negotiations with countries such as China, India, France and Japan.

Sri Lanka is currently in negotiations with the International Monetary Fund (IMF) for the next tranche of the USD 2.9 billion bailout package for which the IMF has made external debt restructuring conditional.

The third tranche of the bailout package was released in mid-June as the Washington-headquartered global lender said on August 2 that Sri Lanka's economic reform programme has yielded good results.

Herath said the bond holders had asked for agreement from bilateral creditors on the aspect of comparative treatment of debt.

Meanwhile, asked if Indian projects in Sri Lanka, including the Adani investment projects, had been discussed with Jaishankar, Herath said since the current government is a transitional government – the next parliamentary election is due in November – such matters were not discussed.

The ruling National People's Power (NPP), in the run up to the September 21 election, had said they would annul the Adani wind power project in the southeastern region.

Herath said the government needs to weigh the pros and cons of the Adani wind project.

“The dispute was about the high cost per unit of power and the issue was raised in court. We shall review all matters connected after the next government is formed,” Herath said.