Proparco Sri Lanka has expressed readiness to support private sector financing following the country’s completion of its sovereign debt restructuring. The move signals a renewed flow of development finance opportunities as Sri Lanka emerges from its recent economic challenges.
Proparco Sri Lanka signals readiness to fund firms after debt restructuring
Proparco, the private-sector arm of France’s Agence Française de Développement (AFD), is now prepared to consider financing companies in Sri Lanka, following the nation’s recovery from its debt default. After defaulting on external debt in 2022, Sri Lanka has successfully restructured its sovereign bonds and most of its bilateral debt, including obligations to France’s AFD, restoring confidence in the economy.
The improved outlook has also been reflected in credit ratings. Standard & Poor’s recently upgraded Sri Lanka’s sovereign rating to CCC+ from selective default, marking a positive step for the country’s financial credibility. The upgrade came after the resolution of a sovereign-guaranteed bond linked to the national carrier. With the restructuring complete, Proparco officials have confirmed their interest in reviewing investment opportunities.
Reza Hassam Daya, Global Head of Manufacturing, Agribusiness and Services at Proparco, acknowledged that financing was difficult during the default period. “It was not so easy at that time,” he said, adding that the organisation is now open to considering new projects in Sri Lanka.
Proparco has prior involvement in the Sri Lankan economy, having financed Commercial Bank of Ceylon and Hatton National Bank to provide loans for smaller enterprises before the COVID-19 crisis. The lender, which is 85 percent owned by AFD and supported by private and multilateral investors, focuses on driving private-sector growth while advancing sustainable development and reducing inequality.
Unlike traditional commercial lenders, Proparco accepts a higher degree of financial risk to deliver developmental impact. Djalal Khimdjee, Deputy Chief Executive of Proparco, noted that the agency maintains a non-performing loan ratio of around 5 to 7 percent, deliberately higher than commercial institutions, as part of its development finance model. He explained that global crises, including conflicts, contribute to these averages but remain aligned with Proparco’s mission.
Each year, Proparco disburses around 2.5 billion dollars in financing, with significant portions allocated to climate and infrastructure projects. In 2024, the agency committed 2.8 billion euros, one-third of which went to climate-related initiatives. Out of its 9 billion euro portfolio, 6.5 billion is debt and 1.7 billion is equity, with approximately 15 percent directed toward Asia, amounting to nearly one billion euros.
Typically, 20 to 30 percent of Proparco’s funds are invested in infrastructure, with the rest channeled into manufacturing and services. Much of this is distributed through on-lending, reaching small and medium-sized enterprises (SMEs) — a model that could prove vital for Sri Lanka’s SME sector in the coming years.
Under France’s Indo-Pacific strategy, Asia has grown in importance for the AFD group, and the end of Sri Lanka’s default period has renewed interest in re-engagement. Proparco Sri Lanka’s willingness to finance local firms signals a broader return of development partners to the country, paving the way for investment in green projects, infrastructure, and private-sector expansion.
This renewed access to development finance could be crucial in helping Sri Lanka transition from financial stabilisation to long-term sustainable growth, with Proparco Sri Lanka positioned as a key partner in this recovery journey.