Courtesy Adaderana

Sri Lanka’s Ministry of Finance, Economic Stabilisation and National Policies has issued a clarification on the country’s external debt service payments in the recent past.

Issuing a statement, the Finance Ministry said it is observed that there is a perception in society that the prevailing economic stabilization in Sri Lanka is entirely due to external debt not being serviced, and that once debt service resumes, economic instability will return. 

Furthermore, the ministry mentioned that it is also unfortunate to note that this same narrative is being used to trivialize and undermine the necessity for the critical macroeconomic reforms that are in fact the actual drivers of economic stabilization. 

Accordingly, the Finance Ministry clarified that it is incorrect to say that all foreign debt is not being repaid and that the temporary moratorium on selected external debt service that was announced in April 2022 applied to external commercial debt and official bilateral debt. 

The statement further highlighted that the government continued to service multilateral debt as is the practice under the prevailing sovereign debt restructuring architecture.

Accordingly, the government continually serviced multilateral debt even after the April 2022 moratorium on selected external debt service. Considering the impact of debt service of the overall economy (including Central Bank, State Banks, and private sector) on the balance of payments, in 2022 (including January to April) and 2023, Sri Lanka has made debt service payments of USD 2,483 million and USD 2,589 million, respectively as indicated in the Table below.” 

This amounts to approximately half of the usual debt service payments that Sri Lanka has made in a typical year prior to the announcement of Debt Standstill in April 2022”, the statement added.

The full statement issued by the Ministry of Finance is as follows:

Press Release-Clarification on Sri Lanka’s External Debt Service Payments in the Recent Past by Kaveesha Jayasundara on Scribd