A media briefing focused on the economic stabilization process and the proposed relief packages for citizens was conducted this morning (December 26) at the Presidential Media Center.
The event was attended by Minister of Labor and Deputy Minister of Economic Development, Dr. Anil Jayantha Fernando, along with Deputy Minister of Finance and Planning, Dr. Harshana Suriyapperuma. A detailed media statement outlining the government’s approach to economic recovery was released during the briefing.
Media Statement: Economic Stabilization and Relief Packages
Economic Stability
Establishing economic stability is critical to lifting the nation from the crisis inherited from previous administrations. Upon assuming office, the government faced the fallout of unilateral external debt service suspensions initiated in April 2022, leading to an agreement with the International Monetary Fund (IMF) for an Extended Fund Facility (EFF) worth $3 billion. This program spans four years and involves eight disbursements, accompanied by a debt restructuring process based on a debt sustainability analysis.
While delays and complexities in restructuring have imposed additional costs and burdens, the government remains committed to prioritizing the well-being of its citizens. Following extensive negotiations and interventions, a staff-level agreement was reached on November 26, 2024, aligning with program parameters and revenue mechanisms. Discussions with stakeholders are ongoing to secure the next tranche of the EFF, pending IMF Board approval.
Debt Restructuring Efforts
The debt restructuring process encompasses domestic and external components. The domestic debt restructuring was successfully completed in July 2023. External debt restructuring excludes multilateral creditors, focusing instead on bilateral and private creditors, including holders of International Sovereign Bonds (ISBs).
Key developments include:
- The Official Creditors Committee (OCC), co-chaired by France, India, and Japan, represents 17 bilateral creditor nations and collaborates with entities such as China Exim Bank, China Development Bank, and creditors from Kuwait, Saudi Arabia, Iran, and Pakistan.
- Agreements on terms and conditions were finalized in June 2024, ensuring comparability of treatment (CoT). By October 2023, loans with China Exim Bank were successfully restructured within this framework.
- Bilateral creditors, representing approximately $300 million or 1% of the external debt under restructuring, have also agreed to the framework.
International Sovereign Bond restructuring faced prolonged negotiations. Despite rounds of adjustments and consultations, a critical agreement in principle (AIP) was reached on September 19, 2024, shortly before the presidential election. This restructuring addresses $14.2 billion in bonds, including $1.7 billion in overdue interest, with representation from the Ad Hoc Group (AHG) and a local banking consortium.
Progress and Recognition
The government’s efforts to stabilize the economy through timely decisions and strategic actions have demonstrated a strong political commitment to recovery. These initiatives have garnered independent acknowledgment, including positive evaluations from rating agencies.
