Sri Lanka’s Debt Sustainable If Reforms Hold, IMF Mission Chief Says

COLOMBO (News 1st); The International Monetary Fund (IMF) has confirmed that Sri Lanka’s sovereign debt restructuring is nearing completion, with the majority of bilateral and bondholder agreements finalized.

However, the Fund cautions that debt sustainability hinges not only on restructuring but also on continued fiscal discipline and macroeconomic reforms.

Responding to a question raised by News 1st’s Zulfick Farzan on whether Sri Lanka’s debt can now be considered sustainable—especially with 2028 marked as the beginning of repayment obligations—IMF Mission Chief Evan Papageorgiou emphasized that restructuring alone is not enough.

Papageorgiou noted that the Eurobond exchange was successfully completed in December 2024, and bilateral agreements have been signed with key creditors including Japan and India. Of the $28 billion in external debt under the restructuring perimeter, only $500 million remains to be finalized.

“The finalisation and execution of debt restructuring agreements is key,” Papageorgiou said, “but it must be accompanied by fiscal prudence and ongoing reforms to ensure long-term sustainability.”

He stressed that fixing the debt stock is only part of the solution. Equally important is managing the debt flow—the ongoing fiscal inputs that contribute to future debt levels.

“Fixing the debt slope is important, but also making sure that the flow that feeds into the debt slope is just as important,” he added.

The IMF highlighted the importance of operationalizing the Public Debt Management Office (PDMO) to ensure prudent debt oversight.

Under the current conditions and assuming continued reform momentum, Papageorgiou affirmed that Sri Lanka’s debt is sustainable on a forward-looking basis.