Sri Lanka's Economic Recovery: Key Agreements and Milestones

Sri Lanka has signed crucial agreements with bilateral creditors, including Japan and India, marking a significant step towards economic recovery and an IMF bailout deal. The memorandum formalizes previous provisional agreements and addresses the debt crisis that led to default in 2022. Key events and milestones outline the country's efforts to stabilize its economy.

Sri Lanka signed an agreement with its bilateral creditors led by Japan and India, Sri Lankan president's office said on Wednesday, in a move crucial for the country's economic recovery and a bailout deal with the International Monetary Fund (IMF). The memorandum of understanding formalises a provisional agreement that the debt-ridden South Asian island nation reached in November with the Official Creditor Committee (OCC), co-chaired by Japan, France and India.

The OCC covers about $5.9 billion of Sri Lanka's outstanding external debt of $37 billion, according to the country's finance ministry. Sri Lanka defaulted on its foreign debt in May 2022 after its economy was driven to the brink by a severe fall in foreign exchange reserves.

Below is a timeline of the key events in the crisis and Sri Lanka's efforts to resolve it: 2021-2022

Sri Lanka's economy crumbles after years of over-spending leaves its foreign exchange reserves critically low and the government unable to pay for essentials, such as fuel and medicine. The country's bonds suffer from multiple downgrades by credit rating agencies warning of the increasing risk of default. At the start of 2022 it manages to make a $500 million bond payment but it leaves its foreign exchange reserves precariously low.

MAY, 2022 Sri Lanka is declared in default after it fails to make a smaller $78 million bond coupon payment.

JULY, 2022 Public anger over the rising prices of fuel and other essentials drives protesters to storm then-President Gotabaya Rajapaksa's office and residence. Rajapaksa flees to the Maldives, before moving on to Singapore.

Current President Ranil Wickremesinghe is voted into power by Sri Lankan lawmakers. MARCH, 2023

The International Monetary Fund approves a near $3 billion bailout for Sri Lanka after talks with Wickremesinghe's government and assurances about its plans to repair the country's finances. OCTOBER, 2023

Sri Lanka announces an agreement with China's EXIM (Export/Import) Bank to delay payments on about $4.2 billion worth of loans the Chinese lender it has extended to the country. NOVEMBER, 2023

Other creditor nations including India, Japan and France agree to restructure about $5.9 billion in debt. MARCH, 2024

A group of Sri Lankan officials arrives in London to meet a number of investment funds that hold its more than $12 billion worth of government bonds. Talks advance to the key "restricted" phase where proposals are discussed privately and those involved agree not to buy or sell any of the debt on the open market. APRIL, 2024

The government rejects a proposal tabled by the bondholders. The main stumbling blocks are that some the "baseline" assumptions used differ to those of the IMF and that the plan did not include a contingency option for the government in case the economy fails to recover as expected. JUNE, 2024

The IMF approves the second review of Sri Lanka's bailout programme, releasing about $336 million in funds but the global lender urges Colombo to do more to restructure its debt burden. JUNE, 2024

Sri Lanka signs a deal with creditor nations to restructure its bilateral debt. The cash-strapped South Asian country was also in the process of signing bilateral debt treatment agreement with China EXIM Bank, the country's junior finance minister said. (Compiled by Uditha Jayasinghe and Sudipto Ganguly; editing by Raju Gopalakrishnan)

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