COLOMBO: Sri Lanka signed an agreement with its bilateral creditors led by Japan and India, Sri Lankan president’s office said on Wednesday, in a move crucial for the country’s economic recovery and a bailout deal with the International Monetary Fund (IMF).
The memorandum of understanding formalises a provisional agreement that the debt-ridden South Asian island nation reached in November with the Official Creditor Committee (OCC), co-chaired by Japan, France and India.
Sri Lanka likely to sign bilateral debt agreements on Wednesday, foreign minister says
The OCC covers about $5.9 billion of Sri Lanka’s outstanding external debt of $37 billion, according to the country’s finance ministry.
Sri Lanka defaulted on its foreign debt in May 2022 after its economy was driven to the brink by a severe fall in foreign exchange reserves.
Below is a timeline of the key events in the crisis and Sri Lanka’s efforts to resolve it:
2021-2022
Sri Lanka’s economy crumbles after years of over-spending leaves its foreign exchange reserves critically low and the government unable to pay for essentials, such as fuel and medicine.
The country’s bonds suffer from multiple downgrades by credit rating agencies warning of the increasing risk of default. At the start of 2022 it manages to make a $500 million bond payment but it leaves its foreign exchange reserves precariously low.
May, 2022
Sri Lanka is declared in default after it fails to make a smaller $78 million bond coupon payment.
July, 2022
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