Economists Call for Debt Suspension and New Restructuring for Sri Lanka Following Cyclone Ditwah
A group of 120 economists, including notable figures such as Joseph Stiglitz, Jayati Ghosh, Thomas Piketty, Martín Guzmán, and Kate Raworth, have called for the immediate suspension of Sri Lanka’s external sovereign debt payments and a new debt restructuring in the wake of Cyclone Ditwah. The cyclone, which killed over 600 people and destroyed hundreds of thousands of homes, was described by President Anura Kumara Dissanayake as the largest and most challenging natural disaster in the country’s history.
Sri Lanka, which had restructured its $9 billion national debt last year following a 2022 default, faced annual debt repayments that accounted for about 25% of government revenues prior to the cyclone. Experts warn that the scale of the disaster could consume or exceed the fiscal space created by the current debt restructuring. They emphasize the need for a restructuring that restores debt sustainability under these new disaster circumstances, alongside an immediate suspension of external debt repayments.
The country has sought a $200 million emergency loan from the International Monetary Fund (IMF), which usually entails repayment within 3 to 5 years through the IMF's rapid financing instrument. Research by Debt Justice highlights that post-2024 restructuring private creditors are projected to earn about 40% more from lending to Sri Lanka than lending to the US government.
Additionally, World Weather Attribution reports have linked rising climate heating to more severe flooding events in Sri Lanka, with similar impacts noted across other Asian countries including Indonesia and Malaysia.
