Restructuring Sri Lanka's debt talks

With its ongoing economic crisis and complex multilateral debt negotiations between creditor nations, Sri Lanka is no exception. The IMF extended a loan of US$2.6 billion to Sri Lanka in 2009 on the condition that Colombo reduces the country's budget deficit to around 5 per cent of GDP. But the island nation failed to improve its exports or growth, so it requested another IMF debt facility of about US$1.5 billion in 2016. Between 2015 and 2019, the country's growth rate fell from 5 per cent to 2.9 per cent and government revenue contracted from 14.1 per cent to 12.6 per cent of GDP. The bitter coincidence of falling output and revenue made Sri Lanka reluctant to seek an IMF bailout in the early stages of its 2022 sovereign debt crisis - diminishing its options to avert the current economic disaster. It requires Sri Lanka to restructure all of its debt held by external and private creditors. On the request of Sri Lankan President Ranil Wickremesinghe, Japan will lead the debt restructuring talks with creditor nations. The restructuring of Sri Lanka's debt held by India and China provides Sri Lanka with a certain amount of leverage in the IMF negotiations. The resolution of Sri Lanka's debt relief talks needs to spread the debt relief costs across all the creditor nations, with India now holding a larger stake in the process.