Features

Now Public: Some Secrets of Sri Lanka’s Debt Restructuring

Published

4 months ago

2025/11/30

The IMF issued a ‘lessons learnt’ report in September 2025, giving us extensive information of their observations on Sri Lanka’s debt restructuring undertaken after the declaration of the debt standstill in April 2022, including painstaking details of the entire exercise from their point of view, information which was shrouded in secrecy during the process of restructuring.

(https://www.imf.org/en/-/media/files/publications/wp/2025/english/wpiea2025175-source-pdf.pdf)

The IMF calls the report Sri Lanka’s Sovereign Debt Restructuring: Lessons from Complex Processes. It was prepared by Peter Breuer, Sandesh Dhungana, and Mike Li and was authorized for distribution in September 2025.

It attempts to review “the root causes of Sri Lanka’s debt problem, the deliberation of its solution, and the designs, negotiations, and outcomes of the restructuring processes”, all of which was not shared with the public, now available from an authoritative source.

While some of it is very technical, there are many things in it that we can understand, some that clarify our misconceptions, and some that come as quite surprising. Most of all, it gives a timeline, which enables us to place the decisions made by our governments including its senior officials, and former and new politicians in power. It enables us to situate the choices that were made in context and to figure out the strengths and weaknesses, promises and deceptions that led to the less-than-optimal restructuring choices, and the need for Parliament to be held to account for their lack of seriousness with which they take their responsibilities for financial oversight.

One of the lessons in the report is that all stakeholders including the public should have been kept informed in a timely manner, even granting that there were things that could not be shared at certain points in time.

It shows how important it is for citizens, especially the media, to question the obfuscatory and ill-prepared explanations from politicians, both inside and outside Parliament, and diversionary and deceitful ones from bureaucrats.

So, What Went Wrong?

In the Introduction to the Report is a summary of what went wrong, in the authors’ considered opinion:

· Sri Lanka’s public debt became unsustainable in the run up to its 2022 crisis following policy missteps and insufficient preparation for shocks that subsequently struck.

· The loose fiscal policies and a series of external shocks ultimately led to Sri Lanka defaulting on its external debt obligations in April 2022 for the first time since its independence.

So, who formulated those policies, and whose responsibility was it to buffer us from shocks? Admittedly, Covid-19 was a shock no one could have realistically prepared for, but there were some inexplicable delays in taking urgent measures to minimize that shock.

However, there were other shocks which were manufactured by politicians out of arrogance and ignorance, so let’s not all think that the crisis of 2022 was an unavoidable or ‘natural’ disaster.

It is revealed that Sri Lanka was among the lowest tax take in the world among developing countries, at the time. The restructuring that ensued is described as ‘one of the most complex debt restructuring to date’.

Just as the IMF took pains to learn from our disaster, let us learn some lessons about citizenship, and our responsibility to question those who make policies, hopefully to prevent them from continuing to make those “missteps”.

Something that struck me was the IMF’s declaration that it did not participate in the restructuring or undertake any negotiations. They merely supported Sri Lanka’s efforts at Colombo’s request: “The IMF was not a party of the restructuring, and played no role in the negotiations, and on determination of comparability treatment and inter-creditor equity.” (Para 31)

Somehow, some of us were under the impression that the IMF had a noose round the necks of the administration or the ‘authorities’, which constrained them from getting a better deal for the people. This now seems like convenient, possibly deliberate disinformation, allowed to circulate domestically. The administration did have certain conditions to be met in order to release the Extended Fund Facility, but not the gun to the head that we thought they had. The promised re-negotiations (during the election campaign) of those conditionalities never occurred, and they will remain valid for the duration of their program.

What I share is a fraction of the large amount of information in the Report, which threw a light on the hazy narrative of our descent into and path through the economic crisis and the true story of the negotiations –from the vantage point of the IMF– carried out by the Sri Lankan authorities in order to emerge out of the darkness of the economic crisis.

The Creditor Groups

The IMF report makes a couple of striking points in its Abstract about Sri Lanka’s debt restructuring:

· It was different from all others due to its complexity arising from the diversity of creditors.

· It needed complex coordination among the many stakeholders.

· The majority of creditors were “non-traditional” as in “outside Paris Club”.

· Domestic creditors played a major role in overall debt.

In the graphic they provide of the analysis of Sri Lanka’s debt at the time of default, April 2022, a few glaring facts emerge:

· Half of all debt is domestic.

The report indicates that this will continue to be a feature of Sri Lanka’s economy.

· Private bond holders seem to be twice the amount bi-lateral debt of China and India put together.

The report later states that ISB holders became the largest creditor group among foreign creditors. (What happened to the ‘Chinese debt trap”?)

The ISB holders were in two groups. There was a foreign group and a local group. The local group operated under a ‘consortium of eight domestic financial institutions that held ISBs at the time of Sri Lanka’s default’.

In negotiations with the ISB holders both foreign and local, Sri Lankan authorities signed a non-disclosure agreement.

IMF’s role at this stage was to support reforms and ensure that “all the debt treatments proposed/agreed are in line with program parameters.”

The negotiation strategy and parameters were the “authorities’ prerogative”. They were however guided by:

· Debt sustainability targets defined by the IMF under their program

· The IMF’s baseline macroeconomic framework

The discussions with the official creditors are detailed in the report and seems to have gone smoothly with the proposals of the Official Creditor Committee’s (France, India and Japan as co-chairs) showing ‘significant similarities’ with Sri Lanka’s.

Regarding private creditors, after several rounds of discussions, on September 18. 2024, Sri Lanka announced that it came to an agreement in principle with the foreign ISB Holders, and also with the local bondholders, referred to as the Local Consortium of Sri Lanka (LCSL) comprising 11 members. The local group controlled 12% of the outstanding Bonds. Their legal advisors were Baker McKenszie and Newstate Partners LLP.

New York Law to English Law

Within this announcement, Sri Lanka also announced that they had agreed with the foreign ISB holders to a mechanism that would change Bonds that came under the more equitable governing law of New York law, to English or Delaware law.

The UN reports that 60% of developing country debt is held by private creditors and 52% of it is held under the New York Law.

In 2023, a draft bill was proposed by the New York state called “New York Taxpayer and International Debt Crises Prevention Act”. This was commended by two UN Special Rapporteurs as progressive:

The UN reported on June 8. 2023 that Olivier de Schutter, Special Rapporteur on extreme poverty and human rights, and Attiya Waris, Independent Expert on foreign debt and human rights, welcomed the proposal and “urged lawmakers to adopt the draft bill, which compels private creditors to participate in international debt relief efforts on similar terms as public lenders.”

They further said “”If taxpayers contribute to public debt relief, private creditors should be obliged to participate on the same terms,” they said. “Debt relief must be effective and fair for all, and its costs must be shared by private creditors as well.”

The UN said “The proposed legislation means distressed low and middle-income countries would be able to protect the economic, social and cultural rights of their citizens instead of paying ‘unsustainable’ debt loads.”

With this in the pipeline, globally commended by many as helping to bring in more equitable resolutions of debt crises, why move it (to London) from where it was (New York)? Was it in fact precisely because this legislation was in the offing, enforcing private creditors to take on a fair share of the burden? Indeed, what does it say about the negotiating skills of the Sri Lankan team, or even their motivations?

It is also at this point that Sri Lanka agreed in principle, as with all other clauses, to the Macro-Linked Bonds.

Incapacity or Deception?

On September 23, 2024 President Dissanayake was sworn in, after winning the Presidential Election with 42% of the vote.

In December 2024, the IMF reported that “the authorities successfully completed” the process of bond exchange. They also report that post-restructuring, Sri Lanka’s bonds showed strong performance and Moody’s and Fitch upgraded Sri Lanka’s rating by ‘‘three notches”.

The IMF says that the agreements taken together are consistent with their program parameters.

The swearing in of a new President from an entirely different party with an entirely different political orientation and ideology, to the one that negotiated the agreements with the creditors, did not have the faintest impact on the final agreements that were completed. Despite a campaign run on re-negotiating the terms of agreements by the outgoing administration, they were all signed without any change whatsoever.

None of the excuses accounted for the promises strongly delivered from 2023 until the last day of the 2024 campaign, only to be reneged on, because pausing the process at that late stage was seen as disadvantageous.

Anyone who had access to information of the on-going processes as parliamentarians were, and couldn’t see this two months before they were due to be signed, or decided to mislead the public for votes anyway, has to be regarded with more than a tinge of skepticism, concerning current and future promises.

Lessons Learnt

Under the above heading, the IMF draws out lessons from their experience of Sri Lanka’s debt restructure that they think may be relevant to any future events in other countries. Among others, they make the point that the damage this restructuring caused to Sri Lanka’s economy could have been minimized if it had restructured the debt sooner.

It also indicates some reservation about the Macro-Linked Bonds

. The IMF thinks that the “the one-time adjustment nature” of those bonds “presents risks to Sri Lanka as higher payments after 2028, once triggered, would persist even if economic performance were to deteriorate thereafter.” This seems like an MLB debt trap, one that is too late to get out of.

The IMF declares that the design of the debt restructuring “has increased the complexity of the debt contracts” and urges that Sri Lankan authorities “understand comprehensively their post-structuring debt portfolio risks and rapidly strengthen their public debt management capacity.” Obviously, they didn’t have this capacity before, even though we trusted our ‘authorities’ to have been competent at what they were undertaking. Is this important issue being urgently and adequately addressed?

There are many things that Sri Lanka could have done better. One is that the authorities should have laid out “a clear rationale behind the decision” in early engagement with stakeholders including the public, “throughout the restructuring process”. Clearly, this did not happen.

Going forward, one of the things they recommend is a “sensible public investment program and a sound procurement process”. What does this say about this administration’s tardiness in exactly this urgent area? How can the authorities be made to address this without the regular excuses and promises?

The IMF report details many lessons that were learnt from Sri Lanka’s debt restructuring exercise. It would be an invaluable asset to those knowledgeable in the subject especially since there was such secrecy surrounding the process.

The timeline of the exercise given in detail in the report exposes certain uncomfortable truths. Even though the public was not part of the process, the IMF briefed parliamentarians, including Opposition parliamentarians. Consider this: when we were assured by the JVP/NPP Presidential candidate and his party JVP/NPP, both now in power on that basis – among other factors, that they would renegotiate with the IMF and insist on an alternative Debt Sustainability Analysis (DSA), get a much better ‘haircut’ etc., right up until election day, had they already concluded that they did not have the capacity, the expertise nor the required knowledge as individuals or as a party to do so? The quick signing off on all of the agreements already negotiated or negotiated-in-principle by the previous administration which the JVP-NPP persuaded the people were unsatisfactory, points to this uncomfortable truth: they never meant to deviate from those agreements, however reversible or alterable.

There are many such moments of truth, in the IMF report. Parliament would be well advised to study it with care, and familiarize itself with the numerous issues that led to, made inevitable, and proved to be an utterly complex debt restructuring, which due to many avoidable reasons continues to place the heaviest burden on the mass of citizens who were not responsible for it. They were mostly unaware of the policies, actions and inactions of the ‘authorities’ including the politicians they elected, who were entrusted with managing the economy on their behalf.

By Sanja de Silva Jayatilleka

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Features

Illegal solar push ravages Hambantota elephant habitat: Environmentalist warns of deepening crisis

Published

4 hours ago

2026/03/19

Sahan Weerasooriya

Land earmarked for the project

A large-scale move to establish solar power plants in Hambantota has triggered a major environmental and social crisis, with more than 1,000 acres of forest—identified as critical elephant habitat—cleared in violation of the law, environmental activist Sajeewa Chamikara said.

Chamikara, speaking on behalf of the Movement for Land and Agricultural Reform, said that 17 companies have already begun clearing forest land along the boundaries of the Hambantota Elephant Management Reserve. The affected areas include Sanakku Gala, Orukemgala and Kapapu Wewa, which are known to be key elephant habitats and long-used movement corridors.

He said that what is taking place cannot be described as development, but rather as a large-scale destruction of natural ecosystems carried out under the cover of renewable energy expansion.

According to Chamikara, the clearing of forests has been carried out using heavy machinery, while large sections have also been deliberately set on fire to prepare the land for solar installations. He said that electric fences have been erected across wide stretches of land, effectively blocking elephant movement and fragmenting their natural habitat.

“These forests are not empty lands. They are part of a living system that supports wildlife and nearby communities. Once destroyed, they cannot be easily restored,” he said.

The projects in question include a 50 megawatt solar development undertaken by five companies and a larger 150 megawatt project implemented by 12 companies. The larger project is reported to be valued at around 150 million US dollars.

Chamikara stressed that these projects are being carried out in a coordinated manner and involve extensive land clearing on a scale that raises serious environmental concerns.

He further alleged that certain companies had paid about Rs. 14 million to secure support and move ahead with the projects. He said this points to a troubling failure of oversight by state institutions that are expected to protect forests and wildlife habitats.

“This is not only an environmental issue. It is also a serious governance issue. The institutions responsible for protecting these lands have failed in their duty,” he said.

Chamikara pointed out that under the National Environmental Act, any project of this scale must receive prior approval through a proper Environmental Impact Assessment process.

He said that clearing forest land before obtaining such approval is a direct violation of the law.

He added that legal requirements relating to archaeological assessments had also been ignored. Under existing regulations, large-scale land clearing requires prior evaluation to ensure that sites of historical or cultural value are not damaged.

“The law is very clear. You cannot go ahead with projects of this nature without proper approval. What we are seeing is a complete disregard for legal procedure,” Chamikara said.

The environmental impact of these activities is already becoming visible. With their natural habitats destroyed, elephants are increasingly moving into nearby villages in search of food and shelter. This has led to a sharp rise in human-elephant conflict in several areas.

Areas such as Mayurapura, Gonnooruwa, Meegahajandura and Thanamalvila have reported increasing encounters between humans and elephants. According to Chamikara, more than 5,000 farming families in these areas are now facing growing threats to their safety and livelihoods.

He warned that farmers are being forced to abandon their lands due to repeated elephant intrusions, while incidents involving damage to crops and property are rising. There have also been increasing reports of injuries and deaths among both humans and elephants.

“This is turning into a serious social and economic problem. When farmers cannot cultivate their lands, it affects food production, income and rural stability,” he said.

Chamikara also raised concerns about the broader environmental consequences of clearing forests for solar power projects. While renewable energy is promoted as a solution to reduce carbon emissions, he said that destroying forests undermines that goal.

“Forests play a key role in absorbing carbon dioxide. When you clear and burn them, you are increasing emissions, not reducing them. That defeats the purpose of promoting solar energy,” he explained.

He added that large-scale deforestation in dry zone areas such as Hambantota could also affect local weather patterns and reduce rainfall, which would have further negative impacts on agriculture and water resources.

Chamikara called for a shift in policy, urging authorities to focus on more sustainable approaches to solar power development. He said that rooftop solar systems on homes, public buildings and commercial establishments should be given priority, as they do not require clearing large areas of land.

He also recommended that solar projects be located on degraded or abandoned lands, such as areas affected by past mining or other low-value lands, rather than forests or productive agricultural areas.

“Renewable energy development must be done in a way that does not destroy the environment. There are better options available if there is proper planning,” he said.

Chamikara urged the Central Environmental Authority and the Department of Wildlife Conservation to take immediate action to stop ongoing land clearing and investigate the projects. He stressed that all activities carried out without proper approval should be halted until legal requirements are met.

He warned that failure to act now would lead to long-term environmental damage that could not be reversed.

“If this continues, we will lose not only forests and wildlife, but also the balance between people and nature that supports rural life. The consequences will be felt for generations,” he said.

The situation in Hambantota is fast emerging as a critical test of whether development goals can be balanced with environmental protection. As pressure grows, the response of authorities in the coming weeks is likely to determine whether the damage can still be contained or whether it will continue to spread unchecked.

By Ifham Nizam

Features

Why Mahatma Gandhi’s teachings need to be at the heart of conflict resolution

Published

4 hours ago

2026/03/19

Sahan Weerasooriya

Mahatma Gandhi

All credit to the Tamil Nadu government for taking concrete measures to perpetuate the memory of the renowned Mahatma Gandhi of India, who on account of his moral teachings stands on par with the likes of Socrates, Plato, Aristotle, Confucius and Jalaluddin Rumi, to name a few such all-time greats. The time is indeed ripe to draw the world’s attention to the Mahatma’s humanistic legacy which has resonated in the hearts of peace-oriented sections the world over down the decades.

Under its mega developmental blueprint titled ‘ Tamil Nadu 2030’, the Tamil Nadu government, among other things, intends transforming villages into centres of economic growth in conformity with the Mahatma’s vision of making the village the fundamental unit of material and spiritual advancement. Thus will come into being the ‘Uttamar Gandhi Model Villages Project’, which will be initially covering 10 village Panchayats. (Please see page 3 of The Island of March 11, 2026).

The timeliness of remembering and appreciating anew the teachings of Mahatma Gandhi resides in the utter lawlessness that has been allowed to overtake the world over the last few decades by none other than those global powers which took it upon themselves to usher in a world political and economic order based on the UN Charter and the Universal Declaration of Human Rights. Mainly in ‘the dock’ in this regard are the permanent members of the UN Security Council.

As is plain to see, the international law and order situation has veered out of control. Principal priorities for the international community or what’s left of it is to prevent the current mainly regional war in the Middle East from degenerating dangerously into another world war, coupled with the task of eliminating the possibility of another nuclear holocaust.

The most scorching of ironies is that the world’s ‘number one power’, the US, has virtually lost its way in the ‘Global Disorder’ it has been party to letting lose. For instance, instead of making good its boast of militarily neutralizing Iran and paving the way for the constant flow of fuel and gas from the Strait of Hormus by itself and Israel, it is now appealing to the rest of the West to come to its assistance. Not surprisingly, US allies are indicating their unwillingness to help pull the US’ ‘chestnuts out of the fire’.

Oil and gas are the veritable life blood of countries and going ahead it should not come as a surprise if impatience gets the better of the major powers and the nuclear option is resorted to by some of them under the dangerous illusion that it would be a quick-fix to their growing economic ills and frustrations.

All the above and more are within the realms of the possible and the need is pressing for humanistic voices to take centre stage in the present runaway crisis. As pointed out in this column last week, Realpolitik has overtaken the world and unless the latter is convinced of the self-destructive nature of the major powers’ policy of ‘meeting fire with fire’ to resolve their disputes, annihilation could be the lot of a good part of the world.

For far too long the voice of humanity has been muted and silenced in the affairs of world by the incendiary threats and counter-threats of the big powers and their allies. No quarter has been bold enough in these blood pressure-hiking slanging matches to speak of the need for brotherly love and compassion among nations and countries. But it’s the language of love and understanding that is the most pressing need currently and the Mahatma in his time did just that against mighty odds.

At present the US and Iran are trading threats and accusations over military-related developments in the Gulf and it’s anybody’s guess as to what turn these events will take. However, calming voices of humanity and moderation would help in deescalating tensions and such voices need to go to the assistance of the UN chief and his team.

The Mahatma used the technique of ‘Satyagraha’ or the policy of non-violent resistance to oppose and dis-empower to a degree the British empire in his time and the current major powers would do well to take a leaf from Gandhi. The latter also integrated into the strategy of non-violent resistance the policy of ‘Ahimsa’ or love and understanding which helped greatly in uniting rather than alienating adversaries. The language of love, it has been proved, speaks to the hearts and minds of people and has a profoundly healing impact.

Mahatma Gandhi defined the ideal of ‘Ahimsa’ thus: ‘In its positive form, “Ahimsa” means the largest love, the greatest charity. If I am a follower of “Ahimsa”, I must love my enemy or a stranger to me as I would my wrong-doing father or son. This active “Ahimsa” necessarily includes truth and fearlessness.’ (See; ‘Modern Indian Political Thought; Text and Context’ by Bidyut Chakrabarty and Rajendra Kumar Pandey, Sage Publications India, Pvt. Ltd., www.sagepub.in).

In the latter publication, the authors also defined the essence of ‘satyagraha’ as ‘protest without rancour’ and this is seen as ‘holding the key to his entire campaign’ of non-violent resistance. From these perspectives, the teaching, ‘hatred begets hatred’ acquires more salience and meaning.

Accordingly, the voice of reason and love needs to come centre stage and take charge of current international political discourse. The UN and allied organizations which advocate conflict resolution by peaceful means need to get together and ensure that their voices are clearly heard and understood. The global South could help in this process by seeing to the vibrant rejuvenation of organizations such as the Non-aligned Movement.

An immediate task for the peace-oriented and well meaning is to make the above projects happen fast. In the process they should underscore afresh the profound importance of the teachings of Mahatma Gandhi, who is acclaimed the world over as a uniting and healing political personality and prophet of peace.

If the Mahatma is universally acclaimed, the reason is plain to see. Put simply, he spoke to the hearts and minds of people everywhere, regardless of man-made barriers. The language of peace and brotherhood, that is, is understood by everyone. The world needs more prophets of peace and reconciliation of the likes of the Mahatma to drown out the voices of discord and war-mongering and ensure that the language of humanity prevails.

Features

Exciting scene awaits them …

Published

4 hours ago

2026/03/19

Sahan Weerasooriya

The Future Model Hunt extravaganza, organised by Rukmal Senanayake, and advocacy trainer Tharaka Gurukanda, held in late January 2026, has brought into the limelight four outstanding contestants who will participate, at the international level, this year – Sandeepa Sewmini, Demitha Jayawardhana, Diwyanjana Senevirathna, and Nimesha Premachandra.

Nimesha took the honours as Mrs. Tourism Sri Lanka 2026 and was featured in The Island of 05th March,

Sandeepa Sewmini was crowned Miss Supranational 2026 and will represent Sri Lanka at the big event to be held in Poland later in the year.

A Business Management and Human Resources student, she will be competing under the guidance of Rukmal Senanayake from the Model With Ruki – Model Academy & Agency.

The Mister Supranational Sri Lanka crown went to Demitha Jayawardhana, a 20-year-old professional model and motocross rider.

Apart from modelling he is engaged in his family business.

Demitha Jayawardhana: Mister Supranational Sri Lanka 2026

Demitha is also a badminton player with a strong passion for sports, fitness and personal growth.

In fact, he is recognised for his strength, discipline, and passion for fitness.

A past student of Wycherley International School and St Peter’s College, Colombo, Demitha is currently in his second year of Economics Management at the Royal Institute of Colombo.

He will represent Sri Lanka at the 10th edition of the Mister Supranational pageant, in Poland, in August, 2026.

Mister and Miss Supranational are annual international beauty pageants, held in Poland, and are designed to discover new talent for the modelling and television industries and produce instant celebrities.

The competition focuses on elegance, intelligence, and social advocacy, with contestants, representing their countries.

The newly appointed Miss Teen International Sri Lanka 2026 is Diwyanjana Senevirathna.

She was crowned at the Future Model Hunt and will represent Sri Lanka at the Miss Teen International 2026 pageant in India.

Diwyanjana is noted for her grace and dedication to representing the country at this prestigious event that aims to celebrate talent, intelligence, charm, and individuality, and provide a platform for young girls to showcase their skills.