Introduction
Sri Lanka has been grappling with a growing debt burden for several years now. The country’s external debt, which stands at around $55 billion, is a cause for concern. However, it is the country’s domestic debt that has been a major worry for the government and investors alike. In a bid to tackle the issue, Sri Lanka has announced a debt restructuring plan for its domestic debt. This article provides an overview of the country’s debt situation and the proposed plan to tackle it.
Sri Lanka’s Debt Situation
Sri Lanka’s debt has been growing steadily over the years, with the country borrowing heavily to fund its infrastructure projects and social programs. As of 2021, the country’s total debt stands at around $82 billion, with its external debt accounting for a significant portion of it. However, it is the country’s domestic debt that has been a major cause for concern. Sri Lanka’s domestic debt is estimated to be around $45 billion, which is almost 55% of the country’s GDP.
The country’s domestic debt is largely made up of Treasury bills and bonds, which are short-term and long-term debt instruments, respectively. The government has been relying heavily on these instruments to fund its budget deficits. However, the high interest rates on these instruments have led to an increase in the country’s debt burden, making it difficult for the government to service its debt.
Debt Restructuring Plan
To tackle the issue of its domestic debt, Sri Lanka has announced a debt restructuring plan. The plan involves the reworking of a part of its domestic debt, with the aim of finalizing the process by May. The plan was presented to creditors during a virtual presentation on Thursday.
The debt restructuring plan is expected to provide relief to the government by lowering its debt servicing costs. The plan involves converting the existing Treasury bills and bonds into new instruments with lower interest rates. The government hopes that this will make it easier for them to service their debt and reduce the burden on the country’s finances.
The plan has been welcomed by investors, who have been concerned about Sri Lanka’s growing debt burden. The country’s debt situation has been a major concern for investors, with some rating agencies downgrading the country’s credit rating in recent years. The debt restructuring plan is expected to provide some relief to investors, who have been closely watching the country’s debt situation.
Conclusion
Sri Lanka’s debt situation has been a cause for concern for several years now. The country’s domestic debt, in particular, has been a major worry for the government and investors alike. The debt restructuring plan announced by Sri Lanka is expected to provide relief to the government by lowering its debt servicing costs. The plan has been welcomed by investors, who have been closely watching the country’s debt situation. The success of the plan will depend on a number of factors, including the willingness of creditors to participate and the ability of the government to implement the plan effectively.
