India’s Lifeline to Sri Lanka: $9.3 Billion Credit Restructured, Interest Slashed

Sri Lanka has secured a major breakthrough in its economic recovery, with the government confirming that the total restructured Line of Credit and Buyers’ Credit facility agreements with India now stand at approximately USD 9,308 million. This move marks a significant milestone in the island nation’s efforts to stabilize its finances and rebuild after years of economic turmoil.

 

Key Highlights:

 

India has concluded a comprehensive debt restructuring deal with Sri Lanka, sharply reducing interest rates on outstanding loans and converting over $100 million in loans into grants in the last six months. This immediate relief is designed to help Sri Lanka manage its debt burden and provide critical support to its economy.

 

The debt restructuring aligns with India’s financing assurances to the IMF, paving the way for smoother disbursements under Sri Lanka’s ongoing IMF Extended Fund Facility programme. India’s financial commitment has been pivotal in unlocking the first tranche of IMF aid.

 

The restructured agreements cover a wide range of sectors, including railways, infrastructure, renewable energy, and essential imports such as fuel, food, and medicines. India’s support extends beyond credit, with humanitarian aid and development assistance provided during Sri Lanka’s crisis.

 

The restructuring provides Sri Lanka with more time to repay its debts, reduces the coupon rate of its bonds, and extends the maturity profile, collectively easing the pressure on the country’s foreign reserves and fiscal position.

 

Both governments have also signed new MoUs to deepen cooperation in digital payments, renewable energy trade, and connectivity, reinforcing India’s “Neighbourhood First” policy and its commitment to Sri Lanka’s long-term recovery.

 

Sources: BusinessWorld, EconomyNext, Business Standard