Sri Lanka Shines In Global Sovereign Debt Roundtable Report

COLOMBO (News 1st); Sri Lanka has made significant progress in its debt restructuring efforts, as highlighted in the latest Global Sovereign Debt Roundtable (GSDR) Co-Chairs Progress Report released on April 23, 2025.

The report underscores the ongoing challenges and milestones achieved by countries facing elevated debt-related risks, including Sri Lanka.

The report notes that public debt levels in low-income countries (LICs) and emerging markets (EMs) were already high before the COVID-19 pandemic and have increased further due to the pandemic.

While, on average, debt levels in LICs and EMs have stabilized since, and are expected to remain stable or decline slightly over the medium term for both LICs and EMs, they remain higher than pre-COVID, with a few countries particularly vulnerable. In addition, many countries, particularly among LICs, face elevated debt service challenges.

"While their debt is sustainable, high interest costs or/and refinancing needs crowd out the space available for development spending such as education, health, and infrastructure investment. Recent developments, including elevated policy uncertainty and tighter financial conditions, especially for frontier markets, have increased debt-related risks," said the report.

Sri Lanka completed its bond exchange in December 2024 with an impressive 98 percent participation rate. This milestone was followed by the successful completion of the third review of its IMF-supported program in February 2025.

The country has also reached an agreement in principle with most of its non-bonded commercial creditors, marking a crucial step in stabilizing its economic outlook.

The report emphasizes the importance of improving debt restructuring processes, particularly through the Common Framework, to ensure timely and effective debt treatments for countries with unsustainable debt.

It also highlights the need for enhanced debt transparency, management, and debtor/investor relations to build resilience and prevent future unsustainable debt accumulation.

Sri Lanka's progress is part of a broader effort by the GSDR to address global debt vulnerabilities.

The GSDR Cochairs have published a "Restructuring Playbook" to support country authorities considering debt restructuring.

This document provides a summary of key steps, concepts, and processes observed in recent sovereign debt restructurings, offering valuable guidance for countries navigating complex debt challenges.