State Minister for Finance Shehan Semasinghe Announces Successful Achievement of Debt Sustainability

State Minister for Finance Shehan Semasinghe, revealed that all uncertainties surrounding Sri Lanka’s debt sustainability have been resolved.

He pointed out that while the international community has expressed optimism about Sri Lanka’s debt restructuring, there are still some local parties who are sceptical for political reasons.

State Minister Semasinghe shared these insights during the press briefing titled “Collective Path to a Stable Country” held at the Presidential Media Centre today (02).

Speaking to the Media Personnel, the state minister further explained;

The positive development regarding debt restructuring, which is crucial for the country’s economic recovery, has been welcomed. Agreements were reached on June 26 with the Official Creditor Committee and the Paris Club countries as bilateral creditors. In addition, an agreement was also reached with China Exim Bank on the same day, completing two important aspects of debt restructuring.

The international community is optimistic about Sri Lanka’s debt restructuring. However, some parties are unwilling to acknowledge this progress for political reasons, which is unfortunate for the country. Initially, we thought that the criticisms from certain parties were due to a lack of understanding of our efforts.

It has become clear that these statements are driven by political hypocrisy. This was evident from the opposition’s actions when President Ranil Wickremesinghe addressed Parliament earlier today. Therefore, the public should be aware of the extent to which political maneuvers are hindering the country’s economic advancement.

Comparisons were made to the debt situations in countries like Ghana, Ecuador, and Argentina. However, it is important to recognize the differences in debt restructuring between low-income and middle-income countries. Debt restructuring in Sri Lanka, as a middle-income country, is more complex than in low-income countries. Despite this, Sri Lanka is progressing ahead in debt restructuring compared to other middle-income nations.

Furthermore, we are ready to outline three key points regarding debt restructuring. Our creditors have granted a repayment grace period from 2024 to 2027. During this time, we have the opportunity to utilize around USD 5 billion for the benefit of the people of the country.

By 2032, the public debt-to-GDP ratio should be reduced to 95%. The gross financial requirement needs to be decreased to 13% between 2027 and 2032, and foreign debt servicing should be lowered to 4.5% during the same period.

We have now finalized a specific debt restructuring plan to achieve these three objectives, eliminating all doubts regarding the country’s debt sustainability.

Through this economic management strategy, inflation in Sri Lanka has dropped from 70% to 1.7%. Additionally, the interest rate for one-year treasury bills has reached 10% in the country’s Treasury bill auction.