The Sri Lankan government, which is trying to finalise a debt treatment plan with its private creditors, will resume talks with them in London after the World Bank’s Spring Meetings in Washington DC concludes later this week, authorities said. 

“We are confident that we will be able to talk to ISB holders and come to a final settlement before the IMF holds their next meeting in June where Sri Lanka’s third tranche will be released,” Sagala Ratnayake, Senior Adviser to the President on National Security and Chief of the Presidential Staff told local media on Monday.

Debt negotiation

Sri Lanka has already reached an “in principle agreement” with its bilateral creditors, including India and Paris Club members, part of the country’s Official Creditor Committee and is hoping to sign a Memorandum of Understanding with them soon. China decided to stay out of the platform, but Beijing has promised to treat Sri Lanka’s debt on terms comparable with those of other bilateral creditors, according to the government.

Unable to fully agree with the deal put forward by the private creditors or International Sovereign Bondholders, the Ranil Wickremesinghe administration, along with its financial and legal advisers Lazard and Clifford Chance, has been negotiating for better terms that are compatible with its International Monetary Fund (IMF)-led recovery programme. Officials did not share the specifics of the negotiations citing confidentiality clauses.

In March 2024, Sri Lanka reached a staff-level agreement with the fund on the second review of its Extended Fund Facility. Once the review is approved by IMF management and completed by the IMF executive board, the island nation will have access to SDR 254 million (about $337 million), the third tranche as part of a programme that put Sri Lanka on a path of austerity.

In its latest development update on Sri Lanka, published this month, the World Bank has noted that Sri Lanka’s economy has shown “early signs of stabilisation” with improved fiscal and external balances, supported by a recovery in remittances and tourism and the continued debt service suspension. “The modest economic recovery will be insufficient to reverse welfare losses experienced during the crisis, poverty is estimated to remain above 22 per cent until 2026,” the World Bank noted.