Features
Sri Lanka’s Debt Restructuring Roadmap: Following the Evidence
By Dr Dushni Weerakoon
Debt restructuring is fundamentally about allocating the associated economic costs to someone. The onus is typically on the debtor country to secure participation from its creditors, applying comparable treatment to all. As with all negotiations, the level and modalities of relief will always be subject to some degree of controversy. Sri Lanka’s recently gazetted domestic debt restructuring (DDR) exercise too has drawn expressions of both support and criticism. Overall though, negotiations have to be framed within certain desired outcomes to minimize costs to the economy. To this end, Sri Lanka’s negotiating stance dovetails neatly with crucial research evidence.
A restructuring process, whether pre-emptive or post-default, imposes significant output costs. For a debtor country to minimize these, some notable findings are:
Output losses are higher in post-default restructuring.When defaults are accompanied by a banking crisis, the fall in output is particularly large.
Even in a post-default setting, output costs can be reduced the quicker the debtor country is able to reach an agreement with its creditors.The size of creditor losses (haircuts) is among the best predictors of participation rates on bond restructuring.
To begin with, there was no real appetite to include a DDR in Sri Lanka’s case, especially in view of the substantial real erosion in value to debt holders as inflation spiraled. But, as opening gambits commenced with external creditors, the bondholder group’s request that ‘domestic debt is reorganized in a manner that both ensures debt sustainability and safeguards financial stability’ could not be ignored if only to avoid an impasse. Sri Lanka has limited room to circumvent a DDR altogether. As a middle-income country, the inclusion of domestic debt optimization is implicitly encouraged in the IMF’s debt sustainability framework (DSF) for market-access countries. It focuses on the total stock of public debt but is avoided by low-income countries where the applicable DSF focuses only on external public debt.
Having opened the door to a DDR, there would have been very real concerns that the combination of skyrocketing inflation and financial fragility would test the banking sector’s resilience to deal with a DDR. Figures on capital adequacy and asset quality (with the non-performing loan ratio on stage three loans rising from 5.2% in 2020 to 11.3% in 2022) and exposure to restructuring the country’s international sovereign bonds (ISBs) meant the stakes were high. When times are uncertain, a herd mentality will rule, and this is to be avoided at all costs.
Another element in a DDR is that there are negative externalities that need to be internalised – i.e. there may be direct costs to a country’s financial sector from a DDR, such as recapitalization and these have to be taken on board. This is particularly so where there is a strong link between the sovereign and its financial system. In setting aside resources to ensure financial system stability, the anticipated fiscal benefits of a DDR can potentially reduce. Thus, on both counts, ring-fencing the banking sector to avert a far more damaging economic crisis and deeper output losses has been the first step in Sri Lanka’s approach.
Having left out the banking sector, the economic cost appears to have been disproportionately directed at the savings of workers contributing to pension funds. Private bondholders have been exempted denying ‘comparable treatment’ while the captive nature of the Employees Provident Fund (EPF), managed by the Central Bank of Sri Lanka (CBSL), means there has been no attempt to ‘secure participation’.
Sri Lanka’s DDR treatment in effect is an example of the considerable degree of influence that a sovereign can exert over domestic legal and regulatory frameworks, unlike that of an external debt restructuring (EDR). Under the terms, pension funds are required to opt for a 30% haircut or be liable for higher taxation at 30% instead of the prevailing 14%. For EPF savers, there is the only assurance of receiving a 9% return in the long-term for a fund that has often performed below par even against the simplest alternative instrument that an average saver may look at, such as one-year fixed deposits (Figure 1a). Where there has been a substantial erosion of real savings from a crisis-induced economic environment, this is scant consolation for workers. The premise of a return to single-digit inflation merely means that price increases have slowed from the previous exorbitant high levels, but the erosion of the value of savings remains very real.
The second step of the negotiating process is to bring as many of Sri Lanka’s external creditors on board as quickly as possible. Having complied with the bondholder group’s request on including a DDR, comparable treatment is being offered by way of a 30% haircut on EDR too. As a bilateral creditor, China’s preference globally is for deferral rather than reduction. But merely pushing repayments down the line with maturity extensions (and some coupon adjustments) still leaves Sri Lanka at the risk of being permanently illiquid and, therefore, vulnerable to repeat short-term crises. Clearly, the deeper the haircut, the more sustainable the debt becomes, but negotiations will likely drag on. A complex creditor group and geo-political wrangling add to these risks. Ecuador, a middle-income country, came to an agreement with its bondholders to a haircut of 9% on USD 17.4 billion in 2020, with a high 98% of bondholders agreeing to the deal. China persisted with maturity extensions and coupon adjustments.
Corralling in the bilateral creditors will require more diplomatic persuasion than economic analysis. China’s recently concluded deal with Zambia to restructure USD 4.2 billion of loans under an initiative driven by the G20 Framework for low-income countries pushed back repayments and accommodated interest rate cuts. This follows on from its deal with Ecuador a year earlier that included maturity extensions and interest rate adjustments on debts worth USD 4.4 billion. There are two key arguments put forward by China for not taking losses in debt restructurings: first, that its loans are development-oriented, tied to projects that generate revenues for the recipients, and second, that multilateral banks should also participate, instead of the current preferred status of having their loans repaid in full. In many ways, Sri Lanka will be a test case on these issues.
The expected deceleration in the contraction of Sri Lanka’s economic output in the coming months is only the start to claw back lost output. This too is under threat. As domestic consumption faltered, net exports were the only positive driver of growth in recent quarters, but there are concerning signs of a slowdown (Figure 1b). In the event, it is even more probable that the allocation of costs associated with debt negotiations will be weighed and measured against the need to get an overall deal done as quickly as possible to support Sri Lanka’s slow-burn economic recovery.
Link to blog: https://www.ips.lk/talkingeconomics/2023/07/18/sri-lankas-debt-restructuring-roadmap-following-the-evidence/
About the Author:

Dushni Weerakoon is IPS’ Executive Director and Head of its Macroeconomic Policy research. She has nearly three decades of experience at IPS and functioned as its Deputy Director from 2005 to 2017. Since joining IPS in 1994, her research and publications have covered areas related to regional trade integration, macroeconomic policy and international economics. She has extensive experience working in policy development committees and official delegations of the Government of Sri Lanka. She holds a PhD in Economics from the University of Manchester.
Features
Complexities in global politics deepen as economic pressures intensify
The present offer by the UK to strengthen Ukraine’s defense capabilities in the missile technology field in particular comes as ‘a stitch in time’ and the initiative is also likely to be appreciated considerably by democratic opinion world wide for the possible morale-boosting effect it would have on Ukraine. Besides continuous arms support, the conviction that the world’s frontline democracies are behind it would prove a huge plus in Ukraine’s eyes in its grinding fightback against the Russian invasion.
While continued US support for Ukraine could not be considered ‘a given’ any more, British Prime Minister Andy Burnham’s words during a recent visit to Kyiv that the UK would stand by Ukraine ‘for as long as it takes’ is the kind of assurance that Ukraine needs at present. For, the conflict in Ukraine is essentially a war of liberation conducted by the latter against an invader and deeply at issue here is the upholding of International Law and its foundational concepts, such as national sovereignty and a nation’s right to political self-determination. The world of democracy is of the firm view that the latter ideals cannot be compromised, come what may.
The UK has its work cut out in this connection. It would find it difficult to convince the Trump administration that it should staunchly stand by Ukraine but it could campaign vigorously with the rest of the West and the EU fold in particular to unflaggingly support the embattled and over-run country.
Ukraine has shown an impressive adeptness in using drone technology in particular against her enemy and has even manufactured her own hardware in this respect but using the relevant blueprints handed over by the UK for the manufacture of more sophisticated cruise missiles, for instance, may prove financially difficult, going forward. It is left to be seen whether the UK and the rest of the West who are with Ukraine will continue to be with her, considering their own rising financial constraints.
The latter impediments could only multiply in the future. Oil, gas and energy prices are on the rise and the latter costs are glaringly reflected in kitchens and meal tables the world over. As we go along consumer discontent would steadily intensify and governments, East and West, would need to figure out with considerable rigour and foresight how such disaffection could be ably managed. Failing which, in most democratic societies, the chances are that publics would be out on the streets demanding that their grievances be redressed forthwith.
These rising concerns are reflected in a recent move by some EU governments to consider imposing what is described as ‘a windfall tax’ on the profits specified major oil companies operating within their shores have made in the wake of the US-Israel war on Iran. The rationale apparently is to use such tax earnings to cushion the rising cost of living of their publics and bolster the respective countries’ social expenditure.
In a recent letter to the president of the EU Council the EU governments referred to said, among other things, while drawing attention to the ‘discontent that is growing over the rising cost of living’: ‘A common approach’ is needed that ‘ensures those who profit from the crisis contribute their share to reducing the burden on the general population.’ Meanwhile, Oxfam with reference to the above development is on record as calling for a ‘permanent windfall tax of at least 50% on profits exceeding a 10% return on investment.’
Such are the rising economic pressures on the majority of Western governments. The question to be posed is how consistent they would be in their assistance to Ukraine if they decide consensually to stand by her. The soaring cost of living in the West compels the conclusion that there could be no guarantee that Western assistance to Ukraine, particularly in the defense and security fields, would be of a longstanding kind.
Of particular concern would be the fact that the weapons systems on offer from the UK to Ukraine could be increasingly costly to manufacture going forward. Besides they would need to be manufactured and put into action without delay.
However, these considerations should in no way deflect Ukraine’s supporters from the principled policy stance of defending her to the extent possible. Because at issue is the defense of International Law and the democratic system of government from their enemies; fascism and authoritarian rule.
While during World Wars 1 and 2 the US was with the major democracies of the West, this time around with regard to Ukraine, the US has chosen to be at cross-purposes with them. For instance, in relation to tariff matters and defense expenditure, in the NATO context, the US is pursuing a hard line which puts it at polar opposites with the West. Thus it is no longer possible to talk unreservedly of a ‘Western democratic alliance’. Put plainly, the cause of democratic development has been weakened.
A measure of relief for the supporters of Ukraine in the West could come by way of the upcoming mid-term polls in the US. If the Democratic Party fares well in them the pressure would be on the Trump administration to defer to opposition opinion at home, accommodate the best interests of Ukraine in its West European policy and perhaps even work towards a diplomatic solution to the Ukraine crisis in cooperation with Russia. Accordingly, the Democratic Party would need to put the Trump administration on the defensive, so to speak.
Until such time Ukraine’s Western supporters have no choice but to remain committed to it, ensure its steadfast defense against the invasion and work judiciously towards keeping the economic pressures at home in check.
Interestingly, at the present juncture in international politics the US could be said to be more weak than strong. For example, it has to some extent been militarily humbled by Iran; so much so it is resorting to economic means to keep Iran in check.
In keeping with this strategy, the US has launched ‘a new big wave of anti-Iran economic sanctions’ at the time of writing, aimed at cutting Iran away from all its major income sources. Some of these relate to digital assets, technology, gold, aviation and shipping. The hoped for result is the complete severance of Iran from the US dollar system.
However, while the UK and EU have no choice but to adhere to their policy of backing Ukraine, going forward they would need to dialogue more closely with the US and ensure that it cooperates with them on outstanding questions, such as Ukraine and the strengthening of democracy. The well being of the world is served when the latter aim is pursued.
Features
“Envisioning Sri Lanka: Beyond Recovery”
OPA 39th Annual Conference calls for Sri Lanka to move Beyond Recovery towards Sustainable Transformation
The Orgnisation of Professional Associations (OPA) successfully concluded its 39th Annual Conference, held recently at the Cinnamon Grand Colombo, under the theme “Envisioning Sri Lanka: Beyond Recovery”.
Held under the patronage of Jayantha Gallehewa, President of the OPA, with the leadership and guidance of Tisara De Silva, President-Elect and Chairman of the 39th Annual Conference, the Conference brought together leading professionals, academics, business leaders and representatives of the public and private sectors to deliberate on Sri Lanka’s next phase of national development.
The Inaugural Session, on August 2026, was graced by Prime Minister Dr. Harini Amarasuriya, as the Chief Guest; Andrew Patrick, British High Commissioner to Sri Lanka, as the Guest of Honour; and Murtaza Jafferjee, Chairman of the Advocata Institute, Sri Lanka, as the Keynote Speaker.
In her address, Prime Minister Dr. Harini Amarasuriya emphasised that overcoming the economic crisis alone should not be Sri Lanka’s ultimate objective, stressing that recovery must serve as the foundation for a broader economic and institutional transformation necessary for sustainable national progress. Reflecting on the difficult period experienced by the country, the Prime Minister noted that Sri Lanka had faced significant economic, social and institutional challenges, which had weakened public confidence and created uncertainty about the country’s future.
She stressed that “recovery only provides the foundation” and that Sri Lanka can move forward sustainably only by using that foundation to bring about meaningful transformation.
The Prime Minister observed that the theme of the OPA’s 39th Annual Conference, “Envisioning Sri Lanka: Beyond Recovery,” aptly encapsulated these national aspirations. She emphasised that Sri Lanka’s objective should not merely be to return to the conditions that existed before the crisis, but to forge a stronger national foundation characterised by robust institutions, a resilient economy, high-quality public services and an enabling environment in which every citizen has the opportunity to thrive.
She further underscored that Sri Lanka’s future development cannot be secured through economic growth and physical development alone. She emphasised that the effective mobilisation of the country’s knowledge, skills and professional expertise, is equally essential to achieving sustainable and inclusive national progress
The Technical Sessions held on 12 August 2026 brought together 19 distinguished experts and professionals representing academia, industry, banking and finance, public health, technology, management and business leadership. Their diverse expertise provided a multidisciplinary platform to examine the critical challenges, emerging opportunities and strategic choices that will shape Sri Lanka’s next phase of development, with particular emphasis on economic transformation, institutional strengthening, digitalisation, private-sector growth, human capital and sustainable development.
The deliberations were structured around four principal sub-themes: “Resilient Recovery and Sustainable Economic Development”; “Future Readiness: Innovation & Transformation”; “Policy for Impact: Advancing Equity, Sustainable Living, and National Well-Being”; and “Leadership, Governance and National Responsibility.”
Across these thematic areas, the sessions explored the structural reforms, institutional requirements and policy choices necessary to move Sri Lanka beyond economic stabilisation towards a more productive, competitive, resilient and inclusive economy. The discussions brought together diverse professional perspectives, enabling participants to examine national priorities through economic, technological, industrial, financial, social and governance lenses.
Particular emphasis was placed on the need to move beyond the diagnosis of problems towards pragmatic, evidence-based and implementable solutions. The deliberations recognised that sustainable national progress requires not only sound policies, but also effective institutions, professional competence, innovation, responsible leadership and the capacity to translate policy into tangible outcomes.
The sessions further underscored the importance of collaboration across sectors, recognising that Sri Lanka’s complex development challenges cannot be addressed in isolation. Stronger engagement among Government, private sector, professional associations, academia and civil society was identified as essential to fostering a coherent national response and ensuring that professional knowledge and expertise are effectively translated into policy and action.
Collectively, the Technical Sessions provided a substantive platform for knowledge exchange, critical reflection and forward-looking dialogue, reinforcing the OPA’s commitment to bringing the country’s professional expertise to bear on the task of building a resilient, innovative, equitable and prosperous Sri Lanka.
The OPA expressed its sincere appreciation to Prime Minister Dr. Harini Amarasuriya, the Chief Guest; Andrew Patrick, British High Commissioner to Sri Lanka and Guest of Honour; and Murtaza Jafferjee, Chairman of the Advocata Institute, Sri Lanka and Keynote Speaker, for their distinguished contributions to the Conference.
Much of what the 39th Annual Conference achieved would not have been possible without the leadership, commitment and generous contributions of Jayantha Gallehewa, President of the OPA; Tisara De Silva, President-Elect and Chairman of the 39th Annual Conference; Eng. Ravi Rupasinghe, General Secretary; Dharshana Wijemanne, Treasurer; Bhanu Wijayaratne, Convener & the Chairman of the Session Planning Committee of the 39th Annual Conference Committee, Past Presidents and Office Bearers; Presidents and representatives of Member Associations; members of the Executive Councils and General Forum; and the distinguished Session Chairmen, Resource Persons and professionals who shared their time, expertise and insights in pursuit of the Conference’s shared vision. The OPA remains immensely grateful to all those whose collective contributions enriched the 39th Annual Conference and strengthened its role as a meaningful platform for professional exchange, informed dialogue and national reflection.
Features
Nostalgia for Lankans in Toronto …
For Sri Lankans living 14,000 kilometres from home, the sound of home has never felt closer — and that’s thanks to one man and his band.
Since stepping into the spotlight, Gamini Hemalal and the Ceymphony Band have turned into the heartbeat of the Sri Lankan community in Toronto.
Their mission is simple: bring the music, bring the memories, bring the people together. And it’s working.
What turned out to be the talk-of-the-town was their intimate musical evening with Sri Lanka’s legendary crooner Sohan Weerasinghe.

Sohan Weerasinghe: Had
everyone on their feet at the
Angus Glen Golf Club, in
Toronto, Canada
It was a ‘full house’ long before the big date. Tickets vanished within days — demand was that overwhelming.
According to those who were there, it was a truly amazing evening. The hall was packed, the energy electric. Sohan didn’t just sing — he owned the stage.
With his velvet vocals, his charm, and that signature style, he had everyone on their feet. The ladies, especially, couldn’t get enough. No wonder they call him “The Ladies’ Man!”
One attendee summed it up perfectly:
“We had so much fun. It is truly a blessing to have our kids around us, enjoying these beautiful moments together. Thank you, Gamini Hemalal, for such a wonderful evening, with an amazing crowd and an incredible atmosphere. Your hard work and dedication truly made it a special night.
“We also need to say a big thank you to the Ceymphony Band for delivering such an outstanding performance. You all were absolutely amazing! Our entire family had a fantastic time, and we truly enjoyed every moment.

Ceymphony Band: Extremely popular in the scene in Toronto
“Wishing you all continued success. Keep up the amazing work, we can’t wait for the next.”
And the next is already on the cards: ‘Halloween Pissu Baila Party 2026,’ on Friday, 30th October, at the famous Angus Glen Golf Club.
Gamini promises a crazy night of baila, music, dancing and Halloween vibes with the Ceymphony Band. Action runs from 8:00 PM to 12:00 midnight, with plenty of prizes to be won.

Gamini Hemalal: Amazing work for the Sri Lankan community,
in Toronto, Canada
Gamini is also putting together a special event, connected with the 2027 Avurudu celebrations — ‘Avurudu Musical Show 2027,’ a uniquely styled musical Avurudu celebration … Ceymphony Band style.
It’s scheduled to be held on Saturday, 10th April, 2027, also at the Angus Glen Golf Club.
Through music, Gamini Hemalal and Ceymphony are doing what diaspora bands do best — they’re shrinking the distance between two worlds.
One baila beat at a time, one full house at a time, they’re making sure that even in Canada, Sri Lankans feel like home.
Yes, there is plenty of action, indeed, for the Sri Lankan community in Toronto, Canada.
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