Amidst the vibrant city of Colombo in Sri Lanka, the nation’s leader declared on Wednesday his pursuit of a moratorium on repaying foreign debts until the year 2028. This decision follows a governmental default that transpired during the island’s unparalleled economic tumult approximately two years prior.

The depletion of foreign exchange reserves triggered prolonged periods of scarcity in both sustenance and fuel, accompanied by street demonstrations compelling the removal of President Ranil Wickremesinghe’s predecessor in the tumultuous year of 2022.

Since then, Sri Lanka has aligned itself with an International Monetary Fund (IMF) rescue package, diligently laboring to mend the public finances that suffered a setback during the government’s default in April of that particular year.

Wickremesinghe articulated that negotiations persist with both bilateral and private creditors to restructure the multibillion-dollar loans and bonds.

“Our aim is to obtain provisional respite from servicing our debts until the culmination of December 2027,” conveyed Wickremesinghe to the parliamentary assembly.

As of September 2023, Sri Lanka’s foreign debt reached a staggering $52.65 billion, as per central bank statistics.

To uphold the IMF bailout program, Sri Lanka is compelled to finalize a robust agreement with foreign creditors, encompassing both bilateral partners and private bondholders, before the IMF undertakes its next economic review by June this year.

In December, the IMF disbursed a second tranche amounting to $337 million from its bailout fund, subsequent to Colombo securing a tentative debt accord with Beijing.

China holds the mantle as Sri Lanka’s most substantial unilateral lender, constituting approximately 10 percent of the island nation’s total foreign debt.

The intricate details of the agreement between Colombo and Beijing remain undisclosed by both parties, yet the IMF asserts that the terms are sufficient to ensure the sustainability of the island’s debt.

However, the IMF stipulates the need for the tentative agreement between the two nations to be solidified before the impending review.

Authoritative sources in Sri Lanka affirm that the agreement with China involves a blend of extending the duration and diminishing interest rates on bilateral debt, eschewing any reduction in the principal amount of loans.

The economic landscape of Sri Lanka has exhibited signs of stabilization post the tumultuous events of 2022, characterized by months of civil upheaval culminating in the ousting of then-President Gotabaya Rajapaksa when a multitude of protestors besieged his residence.

In alignment with IMF directives, Wickremesinghe has implemented substantial tax hikes and curtailed generous consumer subsidies to augment government revenue.