Sri Lanka's Debt Crisis Nears End as 99% of Restructuring Is Finalized

COLOMBO (News 1st); Sri Lanka's sovereign debt restructuring process is now nearing full completion, with around 99% of debt covered under the restructuring perimeter either finalized or subject to agreements in principle, according to the latest report issued by the Global Sovereign Debt Roundtable (GSDR).

The seventh GSDR Co-Chairs Progress Report, released on October 14, said Sri Lanka's debt restructuring is "almost completed," with further progress made through the debt exchange involving SriLankan Airlines and continued implementation of bilateral agreements with official creditors.

According to the report, restructuring of approximately 94% of Sri Lanka's external debt within the restructuring perimeter has already been completed. That figure rises to about 99% when agreements in principle already reached are taken into account. Authorities are continuing good-faith negotiations with the remaining residual commercial creditors.

The report identifies Sri Lanka as one of the major sovereign debt restructuring cases that have advanced significantly since the global wave of debt crises triggered in the aftermath of the COVID-19 pandemic. It notes that, alongside several other countries, Sri Lanka's restructuring process has now reached its final stages, with only a limited portion of commercial creditor negotiations still outstanding.

The GSDR report also noted that Sri Lanka successfully completed the combined fifth and sixth reviews under its IMF-supported Extended Fund Facility programme in May 2026, marking another milestone in the country's economic recovery efforts.

Meanwhile, the report said litigation involving Hamilton Reserve Bank remains pending, with both parties having submitted final arguments between June and August 2026. A court ruling is awaited and no date has yet been set for the decision.

More broadly, the GSDR highlighted Sri Lanka's debt restructuring experience as one of the cases that helped shape improvements in the global debt resolution framework. The report noted that lessons learned from Sri Lanka and other recent restructurings have contributed to the development of new approaches aimed at achieving faster and more effective sovereign debt workouts in the future.

The report also pointed to the continued use of the GSDR Sovereign Debt Restructuring Playbook, which provides guidance to governments managing debt restructurings and was updated this year based on experiences from countries including Sri Lanka.

According to the GSDR, most sovereign debt restructurings launched in 2021 and 2022 are now largely complete, with Sri Lanka among the countries closest to finalizing the process. The findings are expected to boost confidence in the country's ongoing economic recovery as authorities focus on sustaining growth and completing the final stages of debt negotiations.