• Sri Lanka has reached an agreement in principle with bondholders to reduce its debt stock by $2 billion to $4.6 billion, based on economic performance, with an initial reduction of $3.2 billion.

Sri Lanka’s Ministry of Finance has announced an agreement in principle with bondholders on macro-linked bonds (MLBs), which could result in a debt stock reduction between $2 billion and $4.6 billion, depending on the country's economic performance. Under the agreement reached with the Ad Hoc Group of Bondholders (AHGB) and the Local Consortium of Sri Lanka (LCSL), Sri Lanka is expected to secure an upfront debt stock reduction of $3.2 billion, with potential to increase or decrease based on performance. Additionally, Sri Lanka’s debt service payments during the IMF programme period are projected to reduce by $9.5 billion, bond maturities will be extended by over five years, and interest rates will be lowered from 6.4% to 4.4%. The agreement entails a 40.3% present value concession for bondholders in the baseline scenario, with the highest MLB threshold raising this to 33%. These measures are aimed at restoring sovereign debt sustainability, accelerating economic recovery, and facilitating access to international capital markets, while unlocking further IMF disbursements and support from development partners.

Debt restructuring deal to reduce debt stock | The Morning