UK and Sri Lanka Sign Bilateral Debt Agreement to Boost Economic Recovery

The United Kingdom and Sri Lanka have formalized a bilateral debt agreement, marking a crucial step in Sri Lanka’s ongoing economic recovery efforts. The agreement was signed today at the Ministry of Finance, Planning and Economic Development by British High Commissioner Andrew Patrick and Dr. Harshana Suriyapperuma, Secretary to the Ministry of Finance.

This bilateral agreement implements the terms of the debt restructuring deal reached in June 2024 between Sri Lanka and the Official Creditor Committee, co-chaired by France, India, and Japan, along with the UK and other Paris Club creditors.

British High Commissioner Andrew Patrick highlighted the significance of the move, stating:

“We are delighted to sign the UK’s bilateral debt agreement with Sri Lanka. This important milestone is a key step to restore debt sustainability and regain investor confidence to support Sri Lanka’s economic recovery.”

Key Features of the Agreement:

Resumption of interest payments to UK Export Finance (UKEF).

Grace period on principal repayments until 2028.

UKEF to reassess its cover position for Sri Lanka once initial interest payments are received.

The deal is expected to restore debt sustainability and unlock access to international investment, providing Sri Lanka with much-needed financial breathing space following the 2022 economic crisis.

This milestone is seen as a strong signal to global markets that Sri Lanka is committed to restructuring its external debt and creating a more sustainable path toward recovery.