Sri Lanka has reached an agreement in principle to restructure approximately USD 14.2 billion in sovereign debt with International Sovereign Bond (ISB) holders and has also finalized an agreement with the China Development Bank, according to State Minister of Finance, Shehan Semasinghe.
Semasinghe announced on Thursday, September 19, that the ISB deal was secured after successful negotiations with the Ad Hoc Group of Bondholders (AHGB), representing international investors, and the Local Consortium of Sri Lanka (LCSL), representing domestic financial institutions. Together, these groups hold more than 50 percent of the bonds.
In addition to the ISB deal, an agreement with the China Development Bank was finalized, marking significant progress towards Sri Lanka’s goals of restoring economic stability, achieving long-term sustainability, and delivering debt relief.
This ISB agreement follows an initial deal reached with the AHGB in July 2024, which provides contingent debt treatment, offering varying levels of relief based on Sri Lanka’s future economic performance. Consultations with the IMF ensured that the terms are aligned with the Debt Sustainability Analysis (DSA) under Sri Lanka’s IMF-supported program.
The agreement with LCSL includes exchanging bonds held by domestic holders for a combination of USD and LKR-denominated instruments with a reduced principal amount, reflecting the domestic holders’ preference for a non-contingent debt treatment.