Sri Lanka's Fragile Debt Path: A Warning from the Foreign Minister

Sri Lanka's Foreign Minister, Ali Sabry, cautioned against renegotiating the current Debt Sustainability Agreement (DSA) with the IMF, citing potential economic instability and jeopardized financial support from the World Bank and Asian Development Bank. The country, recovering from its 2022 economic crisis, faces severe consequences if terms are altered.

Sri Lanka's Foreign Minister Ali Sabry issued a stern warning against any renegotiation of the Debt Sustainability Agreement (DSA) with the International Monetary Fund (IMF). He stated that altering the current agreement could result in the suspension of upcoming financial tranches due in December, not only from the IMF but also from the World Bank and the Asian Development Bank.

Minister Sabry emphasized that the conditions of the DSA have been codified into law, making them difficult to change. Any attempt to renegotiate could destabilize the recovering economy, which suffered its worst crisis in 2022. Sri Lanka defaulted on its sovereign debt for the first time in April of that year, largely due to depleted foreign reserves.

Highlighting the progress made, Sabry noted the crucial debt restructuring deal struck with international bondholders in July. He warned that further instability might ensue if the country fails to adhere to the agreement's stringent parameters, risking financial aid needed for economic stability and development.

(With inputs from agencies.)